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Year End Adjustments

In Japan, Year-end tax adjustments (also known as Nenmatsu Chousei 年末調整) is an important process for company workers to adjust and accurately pay their income tax.

Why is it needed? For company workers who receive a salary from a single company, a percentage of their salary is withheld as income tax throughout the year. This withholding tax is just an estimate and needs to be adjusted in December if too little or too much tax has been withheld. Please note that people who receive income from different sources and business owners need to file a separate tax return.

Who gets a tax refund?

People who have paid more withholding tax due to irregular monthly income (ie: commission-based employees) and people who had received tax deductions usually end up getting paid back in January as a result of the year-end adjustment. How to confirm it? Employees get a document from their company called Gensen Choushuuhyou (源泉徴収票) usually in January. This document states a breakdown of their total income for the whole year, tax deductions, and withholding tax.

What are the common deductions that can be received? Deduction for dependents: Children and elderly family members that you support are subject to tax deductions. Insurance premiums: Deductions for premiums paid for certain life insurance, private health insurance, and pension policies. Medical Expenses: Deductions for out-of-pocket medical expenses that exceed a certain threshold. Home Loan interest: It is possible to receive a deduction for a home loan up to a certain limit. Make sure you fill out your year-end tax adjustments correctly and provide any documents necessary for deductions. Keskin

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