[2021] What is year-end adjustment? What are the changes this year? [Easy and easy to understand explanation]

Hello, this is Sakashita from the management department.

It's almost time for year-end tax adjustments again this year!

"The year-end tax adjustment is such a pain every year..."

"This is my first year-end tax adjustment, so I don't really understand it..."

For those of you who are wondering, we will explain what year-end adjustment is in a simple and easy-to-understand manner

What is year-end adjustment?

Year-end adjustment is a procedure for settling the income tax that was automatically deducted from an employee's salary over the course of a year (January to December)

The amount of income tax is determined based on the amount of income earned in a year, but rather than being deducted as a lump sum at the end of the year, it is designed to be deducted in advance as withholding tax from your monthly salary

However, this amount of income tax is an estimate calculated by your employer based on your income and information from the previous year

Therefore, employers can only calculate the exact amount of income tax by collecting information from individuals about applicable "income deductions" and "tax credits."

The "year-end adjustment" is the process of adjusting the difference between the exact amount of income tax and the estimated amount of income tax that was deducted from your salary

If more income tax has been withheld from your salary than you should have paid, you will receive a refund

-On the other hand, if the amount of income tax to be paid is insufficient, additional collection will be required

For most people, this is a procedure to get a refund for taxes they have overpaid!

People who are not subject to year-end adjustment

*Year-end adjustment is not required, but you will need to submit a dependent deduction declaration form for next year!

People who are subject to year-end adjustment

On the other hand, those who are subject to this tax are, in principle, anyone other than those who are "not subject to year-end adjustment," and are required to undergo year-end adjustment

How is it different from a tax return?

Filing a tax return is the process by which individuals and corporations report the amount of tax they owe to the tax office

However, as a general rule, company employees are not required to file tax returns

The company pays income tax on behalf of employees from their monthly salaries and bonuses,

This is because the difference between the amount of withholding tax paid is adjusted (year-end adjustment) in the December (or January of the following year) salary

However, those whose salary income exceeds 20 million yen or who retired in the middle of the year do not undergo year-end adjustments

You have to file your own tax return

You can also claim various deductions on your tax return

What are the changes to the 2021 year-end adjustment?

1. No need to stamp year-end tax adjustment documents

Starting in 2021, employees will no longer be required to stamp withholding income tax-related documents submitted to the tax office director, etc.!

This is a change to promote digitalization, affecting many tax-related documents that previously required a seal, and year-end tax adjustments will no longer require a seal

For this reason, employees who receive related documents such as the "Salaried Employee's Insurance Premium Deduction Declaration Form" and the "Salaried Employee's Basic Deduction Declaration Form, Salaried Employee's Spouse Deduction Declaration Form, and Income Adjustment Deduction Declaration Form" do not need to stamp any of the documents

2. No approval is required due to the electronicization of year-end tax adjustment procedures

In order to digitize year-end tax adjustments, until March 2021, employees had to submit dependent deduction declaration forms and other data electronically, and prior approval from the tax office director was required before they could be submitted to the tax office

Due to the amendment, approval from the tax office director is no longer required from April 2021

Don't forget to do your year-end tax adjustment!

Year-end adjustments are done around November, and tax returns are filed between February and March of the following year

There are some things that can only be declared through year-end adjustment, and some that can be declared through either method

There are various types, so don't forget to declare them!