Q: If my company processes year-end tax adjustments, do I still have to file a final income tax return?

 

A:

The year-end tax adjustment and the final income tax return are both procedures related to income tax. The main difference is that year-end tax adjustments are procedures carried out by companies to settle any excess or shortfall in income tax payments, whereas final income tax returns are procedures carried out by taxpayers themselves to finalize the amount of income tax payable.

 

If you are an employee, your income tax is deducted from your monthly salary and bonuses and paid by your employer on your behalf. However, the amount of income tax withheld is only an estimate and not the actual amount of tax due. Therefore, the company will calculate your income tax amount when your annual salary is finalized, and adjust the difference with the income tax withheld. If you have overpaid income tax, you will receive a refund. If you have underpaid income tax, you are required to pay the balance. This procedure is called a year-end adjustment.

 

A final income tax return, on the other hand, is a procedure carried out by taxpayers themselves in order to determine the amount of income tax payable based on their income for the year. A final income tax return is mainly filed by sole proprietors with business income and those with 不動産所得（ふどうさんしょとく）*¹.

 

If any of the following apply to you, you must file a final tax return even if the year-end tax adjustment has already been made.

• Receive salary from two or more places.
• Side job income exceeds 200,000 yen.
• Due to changing jobs in the middle of the year, the income from your previous job was not reflected in the year-end tax adjustment.
• You have a profit from selling real estate.

 

In addition, you should file a final tax return if any of the following apply to you.

• I have paid ふるさと納税（ふるさとのうぜい）^*2 to six or more local governments.
• I will receive 住宅借入金等特別控除（じゅうたくかりいれきんとうとくべつこうじょ)(housing loan deduction)^*3 for the first time.
• I would like to claim deductions that cannot be handled through year-end adjustments, such as medical expense deductions.

 

For more information about year-end adjustments and final income tax returns, please ask at the tax office near where you live.

 

• Tax offices in Aichi Prefecture

https://www.nta.go.jp/about/organization/nagoya/location/aichi.htm　

 

*1　不動産所得

This refers to income from renting property, such as land or buildings, or loans related to such property.

 

*2　ふるさと納税

This is a system that allows you to make donations to local governments that you would like to support. By making such a donation, you can receive a reduction in your local resident tax and a refund on your income tax.

 

*3　住宅借入金等特別控除

You may be eligible for this benefit if you used a home loan to build or buy a new home and meet certain requirements.