Choosing your charity

You may well pride yourself on being generous. Most of us give a percentage of our earnings to charity, and then there are always those additional causes that we view as worthy, and want to support.

So where do the income tax authority and bituach leumi feature in your list of worthy causes in need of your funds?

No, I am being serious. It never ceases to amaze me how many people unwittingly ‘donate’ to these causes amounts above and beyond that which they are obligated by law.

I recently received a letter from clients who wanted to thank me for the more than NIS10,000 that the income tax office refunded them. During our meeting I had examined their pay slips and became aware of their unwitting generosity. As they thanked me they freely admitted that they wouldn’t have had a clue that they were overpaying.

Even those people who are financially savvy don’t always see when they are overpaying. Financial professionals (accountants, financial planners and insurance advisors) who are trained to look at the bigger picture often discover that their clients have been losing substantial sums of money by blindly accepting what the government, banks or insurance companies are charging them, and by not picking up on the many costly errors. Ironically, often people end up losing much more money than the amount they would have paid the professional to evaluate their circumstances.

Another client showed me his pay slips, and I noticed that for some inexplicable reason his employer had wiped out the employee’s vacation days from the pay slip. After bringing the error to the employer’s attention, the mistake was rectified, and my client ultimately ended up getting the equivalent of an extra month’s salary.

Many people who work for multiple employers assume that the estimate given to their employers to withhold tax (teum mas) is a final assessment, and thus never file a final tax return at the end of the year. However, this assessment is always just an estimate and it’s critical to ensure that one didn’t overpay, something which unfortunately is all too common.

Even employees who work for a single employer need to be financially savvy enough to check their salary slip to ensure that they are paying the correct tax. Ensure that your employer knows how many children you have and their correct ages, as it can impact your taxation. Employers are supposed to ensure that all employees fill out a 101 form at the beginning of each year, which updates them with all this information, but that doesn’t always happen. Also, pension payments deducted from your salary and matched by your employer’s contribution need to be tracked to ensure that they are accurately deposited within your pension fund.

If you are self-employed you know that you must file a tax return every year. Hopefully you are also aware that every receipt that you receive from a recognized charity in Israel (which has a seif 46 number) can be included within your annual return, and you then receive 35% of the sum donated. In many cases that can be a very significant amount of money that is returned to you. Salaried workers do not need to file a year-end report but can take their donation receipts to the tax offices and receive the tax rebate on their next salary.

In addition to the tax authority and bituach leumi there are countless accounting areas that are subject to errors – from large to small. For example a financial institution once tried to charge me two extra payments on my mortgage, and my wife has caught numerous mistakes made at grocery stores and shops of all kinds. Pretty much all of our day to day financial interactions should be checked to ensure that we are paying the correct amount.

We are surrounded by a plethora of worthy causes – and often are upset that our lack of funds prevents us from helping other needy institutions. It is written in the Talmud that one who gives more than 20% of his income to charity is considered to be foolishly pious. Make sure you take responsibility for all the various areas of your finances so that you are fully aware of all the recipients of your hard-earned funds.