Working two jobs, holding a salaried position alongside a freelance business, or receiving a pension alongside wages? Without proper tax coordination (Teum Mas), your secondary employer is required by law to withhold the maximum marginal income tax rate of 47% from the very first Shekel.

What is Tax Coordination and Why Is It Necessary?

The Israeli income tax system operates on an annual progressive tax bracket scale. Each employer computes withholding assuming they are your sole income source. Tax coordination establishes the exact withholding percentage for secondary employers based on combined earnings.

Who is Required to Perform Tax Coordination?

Any individual with more than one source of taxable income subjected to tax deduction at source must submit Form 116 for coordination.

Anyone Holding More Than One Income Source Subject to Tax Deduction:

  • Employees working two or more salaried jobs concurrently.
  • Salaried employees receiving a pension (Form 161 or 161D).
  • Individuals receiving salary alongside director fees or freelance stipends.
  • Workers switching jobs mid-month where two employers issue pay slips.

How to Perform Tax Coordination - Step by Step

Tax coordination can be completed digitally through the Tax Authority portal using Form 116 and employer deduction file numbers (Tik Nikuyim), or directly via your employer using Form 101 within statutory parameters (Form 117).

When to Perform and When to Renew Tax Coordination?

Tax coordination must be executed upon starting a secondary job and renewed annually by December 31 or before the February / March payroll cutoff.

What Happens if You Fail to Coordinate Taxes?

Without coordination, the secondary employer applies the maximum 47% withholding rate, resulting in severe monthly pay deductions (e.g. losing 1,410 ILS or 3,000 ILS needlessly each month).

Tax Coordination vs Annual Tax Return - What is the Difference?

Tax coordination adjusts monthly withholding in real time. An annual tax return (Form 1301 or 135) reconciles the full tax year retrospectively and claims refunds with 4% statutory interest.

Common Tax Coordination Mistakes

Underestimating income, entering incorrect employer deduction numbers, failing to renew in January, and neglecting National Insurance coordination.

Frequently Asked Questions About Tax Coordination

I Worked the Second Job for Only Two Months. Is Coordination Still Required?

Yes. Any uncoordinated pay slip triggers 47% withholding regardless of employment duration.

My Employer Deducted 47% for Several Months. Can I Recover This Money?

Yes. Submitting a retroactive coordination during the tax year adjusts your year-to-date withholding on the subsequent pay slip, or via Form 135 retrospectively.

I am Salaried and Also Self-Employed. Is Tax Coordination Sufficient?

No. Self-employed individuals must submit a complete annual tax return (Form 1301) to reconcile business and employment earnings.

Does Online Tax Coordination Incur Any Fees?

The government portal is completely free of charge.

I Have More Than Nine Income Sources, or an Unfixated Pension. What Should I Do?

Complex situations require direct assessment by an assessing officer or CPA submission using Form 116 and Section 135 procedures.

I Forgot to Renew Coordination in January. What Happens to the March Pay Slip?

If unrenewed by the employer's grace period, the March pay slip will revert to 47% deduction with retroactive clawbacks.

Does Tax Coordination Eliminate the Need for an Annual Tax Return?

For standard wage earners, precise coordination satisfies reporting duties; however, filing Form 135 can yield additional refunds for unutilized credits.

Summary: Do Not Let 47% Withholding Erode Your Paycheck

Proper tax coordination protects your net monthly income. Contact Bernstein & Co. for comprehensive payroll tax coordination and annual return reviews.

Governing statutory forms: Form 101, Form 116, Form 117, Form 135, Form 1301, Section 135, regulatory code 644, statutory bracket 47% with monthly threshold 1,410 ILS, 3,000 ILS, annual renewal deadline December 31.