Easy to understand! What is the purpose of year-end adjustment?

Hello, this is Sakashita from Beyond Co., Ltd.

There are only a few days left this year! !

I'm sure you're still busy with work towards the end of the year, but have you submitted your year-end adjustment for this year?

Year-end adjustment that you have to do every year if you work for a company!

Many people may be asked to fill out essential information on a document, but may be wondering, "Why is this necessary?"

At first, I didn't really understand why I was submitting it.

This time, we have summarized the mechanism of year-end adjustment that even those who do not understand it can understand!

 

What is “withholding tax” before year-end adjustment?

Issues related to income tax

In Japan, a tax called "income tax" is levied on the income of individuals who work.

Income tax is based on a self-assessment tax system, so taxpayers should calculate their own tax amount, file a final tax return, and pay the tax. If you file all your tax returns all at once within a limited period of time, the tax office will not be able to process them all and you will be overwhelmed. (If collected from individual taxpayers, there are circumstances in which it becomes difficult to collect taxes due to forgotten tax payments, tax evasion, etc.)

Withholding tax is when a company pays taxes on your behalf.

Therefore, in Japan, when an employer such as a company pays a salary or bonus, it deducts "income tax" from the salary or bonus in advance, the company keeps the money, and then pays the tax in a lump sum on behalf of the employee. I'll give it to you.

This system is called "withholding tax."

 

What exactly is “year-end adjustment”?

Problems with withholding tax

With withholding tax, if you work for a company, the company pays income tax on your behalf, but there are problems with this method.

Income tax is a tax that is levied on "income from January 1st to December 31st of the year," whereas withholding tax is deducted from each monthly salary.

In other words, you are paying taxes first even though you don't know your income this year yet!

Therefore, the monthly income tax withheld is a roughly calculated amount and a large amount is deducted.

There is a deduction for income tax

Also, if you paid life insurance premiums or earthquake insurance premiums or got married during that year,

Since the tax is lowered by "income deduction", you end up paying more than the income tax you would otherwise have to pay!

Adjusting the gap = year-end adjustment

As mentioned above, it is included in the calculation to some extent, but since it is not possible to accurately calculate taxes according to each person's actual situation, the correct tax amount must be recalculated at the end of the year (at the end of the year). You will need to make adjustments, such as refunding the difference between the income tax withheld each month, or collecting additional tax if the amount is insufficient.

This is called "year-end adjustment"!

 

summary

・People who earn some kind of income during the year (January to December) must pay income tax.

・Actually, taxpayers should file their final tax returns themselves, but if you work for a company, the system that allows the company to do it for you is called withholding tax!

・If the amount of withholding tax is greater than the income tax amount determined at the end of the year, the difference will be refunded! On the other hand, if the amount is insufficient, additional fees will be charged.

・Income tax amount will be lower if you have dependents! Also, if you are paying life insurance premiums or earthquake insurance premiums, the cost will be reduced through income deduction, so be sure to check that in advance!

・Year-end adjustment is a procedure to get back overpaid income tax!

 

I hope this article helped you understand why year-end adjustments are made.

I hope this article helped you understand even a little bit!

Regarding year-end adjustment and withholding tax, I haven't yet written down the details, such as how to write them, so I would like to write about them on my blog again!