Year-End Tax Adjustment and Nenmatsu-Chosei

You will receive your year-end tax adjustment check on your last paycheck. This payment is for local taxes, which you pay to the municipality or prefecture. There is also an inhabitant tax, which is paid separately. To find out more about this tax, read this article. In addition, you should also keep an eye out for nenmatsu-chosei, which is the Japanese name for Social insurance premiums.


What is Nenmatsu-chosei? Nenmatsu-chosei, or the year-end tax adjustment, is a procedure whereby employers calculate the amount of income tax that their employees actually owe for the year. Then, they reimburse the employee for any taxes that they overpaid or underpaid due to changes in status during the year. The result of this process will be reflected in the employee’s final paycheck.

Employees can use the Nenmatsu-chosei to make adjustments on their taxes for the previous year. The salary payer will issue a certificate to each employee stating the amount of taxes he has paid during the previous year. In addition, individuals who earn more than JPY 20 million annually can apply for the Nenmatsu-chosei, which is an opportunity for employees to get a tax refund for the year.

Social insurance premiums

If you are a salaried employee, you must pay the estimated annual premium of labor insurance. The estimated amount is the difference between the actual amount paid and the previous year’s estimated premium. You should report to the Social Insurance Office the amount of remuneration paid in April, May, and June. The Social Insurance Office will calculate the amount of premium and apply it for the following insurance year, which runs from September to August.

Employer-sponsored health insurance premiums are currently excluded from Social Security payroll taxes. Counting them as wages would reduce the discrepancy between employee benefits and payroll taxes. In addition, it would reduce the social security poverty rate, which is currently disproportionately low among lower and middle-income workers. However, if Social Security premiums are included in the tax base, they would re-affordably reduce poverty among elderly beneficiaries.


In many cases, the IRS will defer the deduction of year-end bonuses because of certain forfeiture provisions in the bonus agreement. Generally, a bonus payment made after the year-end date is considered to be deferred compensation and cannot be deducted until it is paid. For this reason, taxpayers with accrual-basis compensation should consider the deferral of year-end bonus deductions before submitting their year-end tax return.

The CCA provides clarity on the structure of bonus pools. Specifically, it identifies the bonus amounts as a critical element of the analysis. Consequently, an employer must pay the employees who are eligible to receive the bonuses, and unpaid bonus amounts must not revert to the taxpayer. Therefore, reallocating the bonuses will eliminate the risk of unpaid bonuses reverting to the taxpayer. This process will allow the bonus pool to qualify as a fixed obligation.

Tax withholding

If you are not sure whether you have made the right year-end tax adjustment, you should review your last paycheck. Are you paying too little or too much? If so, you can change your tax withholding for the rest of the year. But you must act quickly to have any effect on your withholding for 2021. For example, if you are under-withholding in 2018, you may be eligible to receive a refund of a portion of the tax that was not withheld.

The federal government bases the amount of tax withholding on the W-4 form that you complete and submit to your employer. If you find that you are significantly over-paying or underpaying your taxes, you will have to adjust your W-4 form. Also, if you don’t owe any income tax, you can instruct your employer not to withhold any tax from your paycheck. This exemption is valid for one calendar year only.

Loss harvesting

For high-net-worth investors, loss harvesting is critical to maximize investment returns and minimize taxes. The process involves tracking lot-level cost basis and selecting alternate securities that correspond to investment goals. It is critical to observe the wash sale rule. For this reason, many look to brokers to assist them in harvesting tax losses. Wealthfront has built a sophisticated Tax-Loss Harvesting service that regularly checks client portfolios for opportunities to harvest tax losses.

Tax-loss harvesting is a strategy that can help investors reduce their year-end tax adjustment by offsetting their realized capital gains against their other income. This is particularly helpful if the taxpayer’s taxable income is large. TDAIM analyzes client portfolios daily to identify potential tax-loss harvesting opportunities. Depending on the nature of the investor’s portfolio, TDAIM can help clients realize losses throughout the year.