FAQS2021-04-26T12:58:35+00:00

Frequently Asked Questions

Self-Employment Income vs. Salaried Income2021-02-18T15:40:25+00:00

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/

Where to File U.S. Income First – United States or Israel2021-02-18T09:50:10+00:00

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.

PFICS – Israeli Mutual Funds & Teudot Sal2021-02-18T09:49:43+00:00

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.

Obtaining US Citizenship for a Child2021-02-09T08:24:14+00:00

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.

IRS Identification Verification Letter2021-02-09T08:24:15+00:00

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
Inheritances & Gifts2021-02-09T08:24:15+00:00

FBAR Reporting Requirements

Status

Amount

Reporting

US citizen gives a gift 

Up to $15,000

Above $15,000

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 $157,000

Above $157,000

No reporting requirement

The giver must report

Options2021-02-09T08:24:16+00:00

Options

Generally, there are 2 types of options:

Incentive Stock Options (ISO) – granted only to employees

Date of Grant – no tax to the option holder.

Date of Exercise – no ordinary tax, however, the option holder adds the spread (the time from the Date of Grant to the Date of Exercise) as income in calculating Alternative Minimum Tax (AMT), unless the option holder sells the stock in the same calendar year.

Date of Sale – if the sale occurs both more than 2 years after the option Date of Grant and more than 1 year after the Exercise Date, the option holder is taxed at long-term capital gain rates on the difference between the sale proceeds and the purchase price (plus any amounts taxed as ordinary income for AMT purposes). If these dates are not met, the income will be taxed as ordinary income rates (partly as ordinary income and partly as capital gains).

NSO Non-Statutory Options (NSO) – granted to employees, directors & consultants

Date of Grant – no tax to the option holder.

Date of Exercise – the option holder is taxed on the spread at ordinary income tax rates.

Date of Sale – capital gain rates apply.

IRC 83(b) Election

The 83(b) election is a provision under the Internal Revenue Code (IRC) that gives an employee, or startup founder, the option to pay taxes on the total fair market value of non-qualified stock option at the time of granting.

The 83(b) election documents must be sent to the IRS within 30 days after the issuing of restricted shares. In addition to notifying the IRS of the election, the recipient of the equity must also submit a copy of the completed election form to their employer.

Using an 83(b) election may not always be favorable. While it might result in paying less tax, there are still risks involved in using this election.

RSU’s2021-02-09T08:24:16+00:00

RSU’s

A restricted stock unit (RSU) is a form of compensation issued by an employer to an employee in the form of company shares. RSU’s are issued to an employee through a vesting plan and distribution schedule after achieving required performance milestones or upon remaining with their employer for a particular length of time. RSU’s give employees an incentive to stay with a company long term and increase profitability so that their shares increase in value. If an employee decides to hold their shares until they receive the full vested allocation, and the company’s stock rises, the employee receives the capital gain minus the value of the shares withheld for income taxes and the amount due in capital gains taxes. Restricted stock is included in gross income for tax purposes, and it is recognized on the date when the stocks become transferrable (also known as the vesting date).

ITIN Renewal 2021-02-09T08:24:16+00:00

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 Validity2021-02-09T08:24:16+00:00

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.

Pensions/Hishtalmut Withdrawals2021-02-09T08:24:17+00:00

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 39112021-02-09T08:24:17+00:00

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 88222021-02-09T08:24:17+00:00

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 Form2021-02-09T08:24:17+00:00

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:

https://www.irs.gov/pub/irs-pdf/fw9.pdf

IRS Addresses2021-02-09T08:24:18+00:00

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
3651 S IH35
Austin TX 78741

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

Sale of A Property2021-02-09T08:24:18+00:00

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.

Rental Income2021-04-28T13:48:33+00:00

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.

American Opportunity Tax Credit2021-02-09T08:24:19+00:00

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 Year2021-02-11T12:28:04+00:00

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

https://www.irs.gov/payments/direct-pay

2

Credit Card

https://fed.acipayonline.com/

Select Form 1040 Series

Select Pay 1040-ES – Estimated Tax – Tax Tear 2021  

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 2021 for Form 1040-ES, then “2021 Form 1040-ES” must be written on the check.

The check should be mailed to:

Internal Revenue Service
P.O. Box 1300
Charlotte, NC 28201-1300
USA

Current Year & Prior Year Payments2021-02-11T12:34:24+00:00

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

https://www.irs.gov/payments/direct-pay

2

Direct Withdrawal from US Bank Account via Tax Return

  • When filing a tax return, please provide us with the following bank account information and we will include it on the tax return:

    • Name of bank
    • Routing number
    • Account number
    • Indicate if it is a checking or savings account
3

Credit Card

Current Year Payment

Prior Year Payments

https://fed.acipayonline.com/

Select Form 1040 Series

Select this option to make a payment for the current tax year 2020

Select Pay 1040 Current Tax Return – Tax Year 2020

Select this option to make payments for prior year tax returns.

Select Pay 1040 Prior Tax Return Years – Tax Years 2001-2019

 

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 2020 for Form 1040, then “2020 Form 1040” must be written on the check.

The check should be mailed by registered mail to:

Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA

 

IRS Payment Options2021-02-09T08:24:20+00:00

IRS Payment Options

Extension Payments

If a taxpayer owes money for the 2020 tax reporting, we recommend making an extension payment prior to April 15th, 2021. Interest will begin to accrue after April 15th, 2021 and penalties will accrue after June 15th, 2021. 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

https://www.irs.gov/payments/direct-pay

2

Credit Card

Tax Return Reporting Deadlines2021-04-26T07:08:13+00:00

Tax Return Reporting Deadlines

US TAX FORM & RETURN TYPE

2020 TAX YEAR 

EXTENSION*

Form 1040 – US Resident

April 15th, 2021

October 15th, 2021

Form 1040 – Non-US Resident

June 15th, 2021

October 15th, 2021

Form 1040NR

April 15th, 2021

October 15th, 2021

FBAR

April 15th, 2021

October 15th, 2021

Form 1065: Partnership

March 15th, 2021

September 15th, 2021

Form 1120: US Corporation

April 15th, 2021

October 15th, 2021

Form 1120S: US Corporation

March 15th, 2021

September 15th, 2021

Estates & Trusts

April 15th, 2021

September 15th, 2021

  • NurkinCPA files extensions for all customers who have previously reported with the firm
Minimum Income Requirements for Filing Tax Returns2021-02-18T15:43:12+00:00

Filing Status

Under 65

Over 65

Single

$12,400

$14,050

Married Filing Jointly

$24,800

$27,400

Married Filing Separately

$5

$5

Head of Household

$18,650

$20,300

Qualifying widow(er) with dependent child

$24,800

$26,100

Self Employed

$400 (net earnings)

$400 (net earnings)

FBAR Reporting Requirements2021-04-26T07:07:45+00:00

FBAR Reporting Requirements

All US citizens, regardless of age, must file a yearly FBAR if the cumulative amount of all accounts outside the US equals $10,000 or more. Accounts include bank accounts, hishtalmuts, pensions, gemels and insurance with a savings component. Failure to file a timely FBAR carries a minimum penalty of $10,000.

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