Does an Employee Need an Accountant?

When Does an Employee Need an Accountant?

We receive this question frequently, and the answer is: not every employee requires accounting support, but more employees than think so could benefit from a consultation with a certified public accountant.

Let's be clear — if you are a "standard" employee receiving a payslip from a single employer with no business expenses or additional income, your employer is likely calculating your deductions correctly. The Tax Authority will not pursue you.

However, if you are in a more complex situation — multiple employers, rental property income, freelance work on the side, or deductions that appear incorrect on your payslip — it is highly advisable to consult with a professional.

Scenarios Where an Employee Almost Always Needs Accounting Support

If you are an employee with secondary income, the likelihood of reporting errors increases significantly. For example:

• Freelance or side work — even small freelance jobs require proper reporting to income tax and national insurance. Many employees forget to report this entirely.
• Multiple employers during the year — each employer calculates deductions separately, which can lead to duplicate or excess deductions. This is actually a situation where a tax refund is quite likely.
• Income from rental property or room rental — such income requires special reporting, and some of your expenses may be deductible.
• Deductions for continuing education fund or private pension — if you have contributed to a continuing education fund or opened a private pension plan, there are tax actions you must take in your annual tax return.
• Significant professional expenses — if you have spent on professional training, books, or work equipment, some of these may be deductible from your income.

Common Errors in Employee Payslips

In our work with employees, we see certain errors that repeat themselves. Often they are small, but they add up to a significant amount.

Incorrect national insurance deduction is one of the most common. The employer is supposed to deduct a certain percentage from your salary, but sometimes the rate is not updated or there is a calculation error. If you work for a small employer, the risk of error is higher.

Another thing that happens — when an employer changes the deduction rate in a certain month but forgets to update others. The result? A double deduction in one payslip and a partial deduction in another. This occurs mainly when there is a change in contract (salary increase, change in job type, or part-time work).

Also, deductions that should not have been made at all — for example, a health insurance deduction you did not agree to, or a deduction for a fund you did not wish to join. This is rare, but it does happen.

How Does Tax Reporting Work for Employees?

To understand when you need help, it's important to first understand how reporting works in general.

As an employee, your employer is responsible for withholding taxes from your salary each month. The deductions are for income tax, national insurance, and continuing education fund (if you are a member). At the end of the year, your employer sends a report to the Israel Tax Authority with all the deductions made.

You are not required to file an annual report unless the Tax Authority requests it. However, if you are entitled to a tax refund — meaning more taxes were withheld from your salary than you actually owe — you can file a refund request.

When Are You Entitled to a Tax Refund?

A tax refund for employees typically occurs in three situations:

First, if you worked only part of the year — for example, you started work in June or left a job in September. In the months you did not work, your employer did not withhold taxes, but in the months you did work, the withholding was calculated as if you were working the entire year. The result: excess withholding that you are entitled to recover.

Second, if you worked for multiple employers in one year. Each employer calculates their withholding separately, without knowing about the other employers. If your total income is actually lower than the sum of each employer's individual withholdings, you are entitled to a refund.

Third, if you had professional expenses that can be deducted from your income — for example, expenses for work-related studies or travel expenses that do not include commuting to work. When these expenses are deducted, your taxable income is reduced, which can result in a refund.

How Long Does a Refund Take?

If you file a tax refund request yourself through the Tax Authority website, it typically takes several weeks to a month. If there is a problem or question, the Tax Authority may ask you for additional documents, which extends the process.

If you work with an accountant, they will ensure that all documents are in order and all details are correct before filing, which reduces the risk of errors and waiting time.

Comparison: DIY vs. Working with a CPA

After understanding the scenarios, you may be asking: Do I really need to pay a CPA? Can't I just file a refund request myself?

The answer is: Yes, you can. But there are risks.

If you gather your payslips and calculate the refund yourself, you may miss details. A small error in the report — such as an incorrect ID number or unreported income — could lead to your request being rejected. Then you need to file again, which delays your refund by months.

Furthermore, if you submit a report with an error and the Tax Authority discovers it, you may face a penalty. This doesn't always happen, but it does occur.

On the other hand, if you work with a CPA, they verify all details, submit the report properly, and know exactly what documentation you need. This takes a CPA an hour or two, no more. For you, it's a significant time savings and much lower risk.

How Much Does It Cost to Work with a CPA?

The cost of accounting support for an employee is typically much lower than for a freelancer or business owner. Usually, an initial consultation meeting is free, and that's the right time to understand your situation.

If you need help with a tax refund, the cost depends on the scope of work — whether it's just a review or also filing a formal request. But generally, it's more worthwhile than missing a refund that's owed to you.

Common Mistakes Employees Make

Based on years of experience working with employees, we see certain patterns. Here are the most common mistakes:

First mistake: Ignoring deductions that seem incorrect. An employee receives a payslip with a larger deduction than usual, but doesn't ask the employer. Maybe it's due to a salary increase, but maybe it's an error. If you're unsure, ask. If the employer can't explain it, that's a red flag.

Second mistake: Not reporting secondary income. Many employees work as freelancers on the side or sell things online, thinking it's "too small" to report. It's not. All income must be reported. If the Tax Authority discovers it later, the penalty will be far greater than reporting now.

Third mistake: Ignoring Tax Authority requests. If you receive a letter from the Tax Authority, even if it looks like a routine audit, respond to it. Ignoring the request can lead to penalties.

Fourth mistake: Not keeping records of expenses. If you're claiming professional expenses, you need invoices and receipts. If the Tax Authority asks, you need to prove the expense actually occurred. Without documentation, you're in trouble.

Fifth mistake: Not checking the tax refund you're entitled to. Many employees don't know they're entitled to a refund, or think it's "too much hassle" to file a request. It's not. If you're entitled to it, it's your money. Why not claim it?