Frequently Asked Questions
- Reporting Deadlines, Minimum Income Reporting Requirements, FBAR Reporting Requirements
- IRS Refunds & Payments
- Self-Employment Income vs. Salaried Income
- PFICS - Israeli Mutual Funds & Teudot Sal
- Where to File U.S. Income First – United States or Israel
- American Opportunity Tax Credit
- Rental Income
- Sale of a Property
- IRS Addresses, W9 Form, Change of Address, Replacement Check
- Pension/Hishtalmut Withdrawals
- ITIN Validity & Renewal
- RSU’s & Options
- Inheritances & Gifts
- IRS Identification Verification Letter
- Obtaining US Citizenship for a Child
The US and Israel do not have a treaty for self-employment income. That means that your net self-employment income is subject to 15% self-employment tax. This payment is transferred to the Social Security Administration for a future pension from the US. In order to receive this pension, you must complete 10 years of payments or 40 quarters.
For more information please click on following link: https://www.ssa.gov/
PFICS – Israeli Mutual Funds & Teudot Sal
It is not always clear what qualifies as a PFIC which may result in income from PFICs being declared incorrectly. Israeli Mutual Funds, Teudot Sal, ETF’s and Kupot Gemel Lehashkaya are all problematic and fall under the PFIC rules. Sometimes the tax can outweigh the profit on the investment and there may be double taxation. Additionally, if you own these types of investments and don’t sell them by the end of the year, you will have mandatory additional reporting requirements. The safest investments are stocks & bonds.
It is important for you to discuss this issue with your Israel accountant. Their determination on how your U.S. income is taxed in Israel will determine how your U.S. tax return is prepared. Based on our experience, non-resident filers (Form 1040NR) are first reported in the U.S. and then in Israel. U.S. citizens & green card holders (Form 1040) are first reported in Israel and then in the U.S. Additionally, we recommend making all Israel tax payments (current & prior year) by December 31st, 2021.
In order to report a child on a US tax return, the child must have US citizenship in the year of reporting and a Social security card by the due date of the tax return including extensions. For example, if a child was born in May 2019 then the child must have citizenship by Dec. 31, 2019 and the Social Security card must have a date no later than Oct. 15, 2021. For assistance in obtaining US citizenship please contact Michele Coven Wolgel: 02-590-3444, email: lawyer@wolgelaw.co.il.
FBAR Reporting Requirements
The IRS selects returns at random for ID verification. This does not indicate that your filed tax return is incorrect. The verification can still be done even if 45 days or more have passed. You must do the verification if you want to receive your refund.
The most efficient method to do the verification is by telephone. Call the IRS number provided in the letter. Be sure to have available the tax returns for the year being verified and the previous year. For example, if you are waiting for a refund for 2019, then you will need the 2019 and 2018 tax returns.
Below are some types of information you will be asked to provide:
- Full name as written on both tax returns (including initial)
- Social Security Number
- Address as appears on current year tax return and on previous year tax return (including 5-7 digit postal code)
- Dependents (children) on the prior year return
- Names, Social Security Numbers and birthdays of all children
- Tax filer’s mother’s first name, maiden name and father’s full name
- Address (even if it’s the same as previous year)
- Main type of income – salary or self employed
- If self-employed may ask to go to Schedule C to review the profit and loss page
- Is there any other income? From where?
- Owe money or are expecting a refund?
- Amount owed or the amount of the refund
- Was the refund requested to be sent by check or by direct deposit
- If direct deposit, the routing number and account number
- Marital status
- Which tax return form was filed
If the verification process by phone fails, then you can complete the verification process by sending the following documentation by registered mail to the address in the letter:
- The IRS letter (if received)
- Copy of filer’s US passport (must not be expired)
- Copy of filer’s Social Security card
- 1st 2 pages of the tax return for the year being verified
- Full copy of the previous year’s tax return
FBAR Reporting Requirements
| Status |
Amount |
Reporting |
|---|---|---|
|
US citizen gives a gift |
Up to $16,000 Above $16,000 |
No reporting requirement The giver must report |
|
US citizen receives a gift from a NON-US citizen |
Up to $100,000 Above $100,000 |
No reporting requirement The receiver must report |
|
US citizen gives a gift to a US citizen spouse |
Any amount |
No reporting requirement |
|
US citizen gives a gift to a NON-US citizen spouse |
Up to $164,000 Above $164,000 |
No reporting requirement The giver must report |
ITIN Renewal
Before renewing your ITIN please check with our office to confirm if it is still necessary to report your ITIN. Please click on the following link to find a Certified Acceptance Agent in Israel who can verify your identity in person and who will complete the W7 ITIN Renewal Form for you.
https://www.irs.gov/individuals/international-taxpayers/acceptance-agents-israel
Once the form is completed please send a copy to our office and we will prepare a letter for you for the IRS. You will need to send this letter and the original ITIN renewal form to the IRS.
ITIN Validity
An ITIN is valid for a period of 5 years. The ITIN holder will usually receive a letter of notification from the IRS of the impending expiration. However, there are cases where a letter was not received. To check if the ITIN is still valid call the IRS at: 00-1-267-941-1000 option 1, option 2 from 13.00 Israel time.
While in Israel withdrawals from pensions and hishtalmuts are tax free that is not the case regarding US. Before making any withdrawals, please contact our office for assistance.
Replacement Check – Form 3911
If you did not receive your refund check and you believe it was lost or stolen, then we recommend filing Form 3911. Please be aware that once the form is filed, any check that was issued will be cancelled and processing is a minimum of 6-12 weeks.
The form can be downloaded at the following link:
https://www.irs.gov/pub/irs-pdf/f3911.pdf
Mail the form to:
Department of the Treasury
Internal Revenue Service
Austin TX 73301-0215
USA
Change of Address Form – Form 8822
Correspondence with the IRS is always by regular post office mailing. If you’ve recently moved, you will need to fill out Form 8822 and send it to the IRS. The form can be downloaded at the following link:
https://www.irs.gov/pub/irs-pdf/f8822.pdf
Mail the form to:
Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
USA
W9 Forms
How to fill out a W9 Form:
- item 1 – full name in English as it appears on US Tax Return
- item 2 – leave blank
- item 3 – mark the first one – Individual
- item 4 – leave blank
- item 5 – put your address (street)
- Item 6 – put your address (city, State, Zip Code, Country)
- item 7 – leave blank
- Part 1 – put SSN
- Part 2 – sign & date
The form can be downloaded at the following link:
IRS Addresses
|
Mailing Options |
Owe / Do Not Owe |
Address |
|---|---|---|
|
FEDEX/UPS/DHL |
Use this whether you owe or do not owe |
Austin – Internal Revenue Submission Processing Center USA 1-800-829-1040 |
|
Registered Mail |
Use this address if you do not owe |
Department of the Treasury Internal Revenue Service Austin TX 73301-0215 USA |
|
Registered Mail |
Use this address if you owe |
Internal Revenue Service P.O. Box 1303 Charlotte, NC28201-1303 USA |
There is an exemption in the US on the sale of a property if you lived in it for 2 of the last 5 years prior to the sale. For a single filer, the exemption is $250,000 and for joint filers it is $500,000. Any profit above these exemptions will be taxed as a capital gain. If you did not live in the property for 2 of the last 5 years prior to the sale, then the property is deemed an investment and will be taxed as a capital gain.
In Israel, rental income up to 61,200 NIS is exempted from reporting. In the US, there isn’t this exemption and therefore rental income must be reported and may be taxable.
US citizens studying at an accredited university are entitled to a refund on their tuition payments for the first 4 years of University for a 1st degree. If you are married to a non-US Citizen (without an ITIN), you are not entitled. If you are a dependent on someone else’s return you are also not entitled.
Institutions include:
- Ben Gurion University
- Haifa University
- Hebrew University
- Raphael Recanati International School at IDC Herzliya
- Sackler Faculty of Medicines
- Technion
- Tel Aviv University
What is required?
- A signed Form 1098-T submitted by the university to the IRS for the tax year being reported.
- A letter from the university on their letterhead confirming the student’s enrollment, degree and total tuition paid. Must be signed and should have a contact name and number.
Estimated Tax Payments for Next Tax Year
The tax filer has three options to choose from on how to make an estimated tax payment for the next tax year.
|
Options |
Payment Methods |
Payment Instructions |
|---|---|---|
| 1 |
Payment Instructions |
|
| 2 |
Credit Card |
Select Form 1040 Series Select Pay 1040-ES – Estimated Tax – Tax Year 2023 |
| 3 |
US Bank Check or Certified Bank Check |
Check payable to: UNITED STATES TREASURY The taxpayer’s 9 digit Social Security number should be written on the front side of the check as such: “SSN #” and then the 9 digits. The form and year that the check is for should also be written on the front side of the check. For example, if the payment is for 2023 for Form 1040-ES, then “2023 Form 1040-ES” must be written on the check. The check should be mailed to: Internal Revenue Service |
Current Year & Prior Year Payments
If a taxpayer owes money for the current tax year, we highly recommend making payments to prevent any penalties or interest accruing to the amount due. The tax filer has four options to choose from on how to make a payment:
|
Options |
Payment Methods |
Payment Instructions |
|---|---|---|
| 1 |
Direct Pay via US Bank Account |
|
| 2 |
Direct Withdrawal from US Bank Account via Tax Return |
|
| 3 |
Credit Card Current Year Payment Prior Year Payments |
Select Form 1040 Series Select this option to make a payment for the current tax year 2022 Select Pay 1040 Current Tax Return – Tax Year 2022 Select this option to make payments for prior year tax returns. Select Pay 1040 Prior Tax Return Years – Tax Years 2003-2021 |
| 4 |
US Bank Check or Certified Bank Check |
Check payable to: UNITED STATES TREASURY The taxpayer’s 9 digit Social Security number should be written on the front side of the check as such: “SSN #” and then the 9 digits. The form and year that the check is for should also be written on the front side of the check. For example, if the payment is for 2022 for Form 1040, then “2022 Form 1040” must be written on the check. The check should be mailed by registered mail to: Internal Revenue Service |
IRS Payment Options
Extension Payments
If a taxpayer owes money for the 2022 tax reporting, we recommend making an extension payment prior to April 15th, 2023. Interest will begin to accrue after April 15th, 2023 and penalties will accrue after June 15th, 2023. The tax filer has two options to choose from on how to make a payment:
|
Options |
Payment Methods |
Payment Instructions |
|---|---|---|
| 1 |
Direct Pay via US Bank Account |
|
| 2 |
Credit Card |
|