More Information, More Benefits The Know-How for the Best Year-End Tax

More Information, More Benefits

The Know-How for the Best Year-End Tax

At the end of every year, employees are on edge about the year-end tax, “the extra payment.” Although all the necessary documents must be prepared at the office, the know-how for effective year-end taxes are actually quite simple. Let’s look into some practical tips for year-end taxes.

 What is the year-end tax?

The year-end tax is the payment of the difference between the taxes deducted every month for the year and the fixed tax due at the end of year. One has to pay the difference if the fixed tax due is higher than the amount deducted each month. If not, you can receive a refund.

 How to get more tax refunds?

Though a number of ways exist, the most common way is to use “cash” or a cash (debit) card more often. The tax deduction available for credit card purchases was reduced from 20% to 15% this year, while the deduction for cash card and cash receipt purchases was raised from 20% to 30%. This suggests that more frequent use of cash cards and cash receipts would be beneficial.

However, all purchases are not deductible. The total consumption needs to be over 25% of yearly income to be eligible for deduction. Therefore, it would be better to use a credit card for all purchases up to 25% of your annual salary, and cash card and cash receipt for purchases after you have exceeded 25% of your annual salary.

 Use year-end tax simplification service

Since the introduction of the year-end tax simplification service, year-end tax preparation has become much easier. Details on your expenditures can be viewed on one page by accessing the year-end tax simplifications service page on the National Tax Service web-site. Employees need to prepare receipts for items that do not appear on this page, receipts for things like glasses and contact lenses, up to 500,000 won per person.

The herbal medicines are also eligible for medical exemptions so receipts are necessary for those as well. Additionally, political fund donations and donations to churches or volunteer organizations also tax exempt.