Digital Form 101 and Tax Coordination: The Workflow for a Business With Employees

An electronic Form 101 is not a PDF filled in on screen. Under the rules the Israel Tax Authority publishes, it is a process with personal identification of the employee, a declaration, a lock, an employer review, and a certified electronic signature by the employer - and only at the end of that is the form treated as complete.

This is a technical description of a workflow and of system requirements, not tax, legal or accounting advice.

What the electronic process actually consists of

The rules describe an ordered sequence, and anyone automating around it has to map every screen onto it:

1. The employee logs in with a personal password ensuring one-to-one identification, and updates their details on the form shown on screen.
2. The system runs a completeness check on the mandatory fields, and finishing is conditional on all of them being filled.
3. The system enforces attaching documents before the process can finish; the documents are scanned into the system and stored as files in a computerised archive.
4. The form is presented to the employee visually, and they confirm a declaration that the details are complete and correct.
5. The employee re-enters the login password, and at that stage the form locks so it can no longer be edited.
6. The employer reviews and validates the attachments in order to accept or reject, and signs with a certified electronic signature.

The rules note that between the lock and the employer's signature, an interim printout can be made available to the employee, carrying the date of production and wording stating that the document is valid only once the employer has signed it electronically.

Which fields may carry over from last year?

This is the question that decides how much manual work is left every January, and the rules are specific. Carrying data over is not mandatory, and it is limited to defined parts and fields.

The rules add that the employee must be able to update the carried-over data. In implementation terms, carry-over is not transparent pre-filling but a confirmation screen per part, each requiring an explicit action from the employee before the next step.

Where tax coordination fits in

Form 101 and the tax coordination procedure are two different things that meet on the same employee. The form is the employee's declaration to the employer; tax coordination arises where there is income from an additional source. The Tax Authority runs an online service for performing tax coordination, at the end of which a certificate is produced to present to the employer.

For an internal process, that means three separate things to track:

• Which employees declared additional income, taken from the form itself.
• Whether a tax coordination certificate was received for that employee, and which period it covers.
• When the certificate should be checked again, because it does not necessarily last indefinitely.

Tracking documents that arrive from people and then expire is the same problem described in a digital client folder with access rules and retention, except that the other party is an employee rather than a client.

What happens when the process is not completed?

The rules say explicitly that where the process was not completed through the employer's signature stage, the form is treated as a defective form, whose consequence is maximum tax withholding for the employee. That is not a penalty on the business; it is an immediate effect on a person's payslip.

• A form locked by the employee but not reviewed by the employer is not a completed form.
• The rules state that the employee must be informed of the form's acceptance or rejection.
• The rules state that any update or change to employee data is done on a new form through the same process, saved as an updated version, with all previous versions retained.
• The rules state that the forms, the attachments and the employee's confirmation are held in a computerised archive in a way that allows access and retrieval, including all previous versions.

The engineering consequence: this is not a table with one row per employee. It is a version table with one row per submission, and attachments that belong to a version rather than to a person.

What happens to the attached documents

Attachments are the part that drops out of the design and surfaces later. Under the rules, the system enforces attaching documents before the process can be completed, and the documents are scanned into the system and stored as files in a computerised archive. The rules also state that attachments are retained together with the forms and the employee's confirmation, in a way that allows access and retrieval, including all previous versions.

In engineering terms that differs from an ordinary file upload in three ways:

• The file belongs to the submission version rather than to the employee, because a new version can carry different attachments.
• The system has to enforce the attachment as a condition of completion, meaning the block lives in the flow rather than in a warning message.
• Retrieval is needed years later, so the original filename, type and size are metadata rather than a convenience.

Anyone building this over object storage should decide the file identifier scheme up front, because an identifier derived from the name the employee uploaded breaks the moment two employees upload a file with the same name.

What this means for the payroll integration

The output of the process is a locked and signed form, not fields flowing automatically into a calculation. Whoever builds the integration has to decide what moves on and what stays in the archive.

• The employee identifier and the version number, so you can get back to the form a given calculation rested on.
• The employer's signature date, which the rules state appears as visible output on the form.
• Acceptance or rejection status, because a rejection is an event needing action rather than just a value.
• A reference to the archived file, rather than a second copy of the file itself.

How monthly input reaches a payroll calculation, and what breaks when that hand-off is manual, is covered in the employee card to payroll input interface.

Sources

• Rules and instructions for producing an electronic Form 101 for 2026, Israel Tax Authority
• Performing tax coordination online, Israel Tax Authority