Israel Tax Authority Warns Citizens of 2020 Refund Deadline Expiration

Citizens have until January 1, 2027, to claim tax refunds for overpaid taxes from the 2020 tax year, as billions of shekels remain unclaimed in state coffers. According to the Israel Tax Authority and State Comptroller reports, billions of shekels collected in excess await their rightful claimants, though many citizens remain unaware or fear uncovering an unexpected tax debt.

The Tax Authority estimates that approximately 500 million NIS remains in its possession annually for a single closed tax year. While officials note this is an overestimation due to incomplete data, the figure highlights the massive scale of funds left behind simply because taxpayers fail to exercise their rights.

Data from the Talfayim Group, specializing in family financial management and planning, shows that the average tax refund in Israel ranges between 9,000 and 9,500 NIS. Moran Cohen, head of the tax refund department at the group, noted that amounts can range from 200 NIS up to 60,000 NIS among older populations.

The total volume of annual state tax refunds reaches billions of shekels, hitting a peak in 2021 with a net refund total of approximately 1.8 billion NIS after debt offsets. Subsequent years saw refund volumes decline to about 752 million NIS in 2025, primarily because those open years are still actively processed and new applications can still be submitted.

The Impact of Green Envelopes and Declining Response Rates

Part of the historical increase in refund applications is attributed to an initiative launched by the Tax Authority, which proactively contacted potential beneficiaries via green envelopes encouraging them to claim their rights. Between 2016 and 2022, the authority dispatched approximately 1.1 million green envelopes. However, following October 7, the initiative was entirely halted as resources were diverted to emergency compensation funds for war damages.

Response rates to the green envelopes started modest and peaked between 2018 and 2019, when about 21% of recipients filed reports. By 2022, response rates dropped to just 4% of recipients, totaling 10,148 reports. Overall, out of more than a million envelopes sent, 192,406 reports were filed, generating a cumulative net refund of approximately 903.6 million NIS for citizens.

Who is Eligible for a Tax Refund?

Tax refunds apply exclusively to individuals who actually paid income tax. For salaried employees, tax calculations rely on annual estimates while deductions occur monthly. Consequently, any mid-year shifts in income levels, employment continuity, or personal status create discrepancies favoring the employee.

Common eligibility triggers fall into four categories:

Employment and salary changes, such as unpaid leave or job switching.
Life events granting tax credit points, including academic degrees or parents of children with special needs.
Deductions and savings benefits, including donations to approved charities under Section 46, life insurance, and pension deposits.
Capital gains, retirement, and one-time events, such as severance pay or pension withdrawals.

Deadlines and the Risk of Discovering Debt

Tax refund applications can be submitted up to six tax years retroactively from the end of the current tax year. The strict deadline means 2020 tax refunds will expire on December 31, 2026. Furthermore, Section 159a of the Income Tax Ordinance mandates an annual 4% interest addition plus linkage differentials on any overpaid amounts.

While fears of uncovering a tax debt prevent many from applying, Tax Authority data shows that between 86.8% and 91.3% of annual requests result in actual cash refunds. Debt discoveries occur in a mere 2.7% to 3.7% of cases, typically caused by omitted secondary incomes such as unemployment benefits, maternity pay, or reserve military service compensation.