Any U.S. citizen, or a person conducting a business or otherwise, whether resident or not, is required to file tax returns with the federal tax authority and, in some cases, the tax authorities of a specific U.S. state. To know whether your business is also must file these returns and in what way, a professional opinion can make a significant importance and prevent inconveniences later.
It is important to understand that American taxation policy is quite different from the Israeli one. The American citizen has a duty to report his income worldwide – that is, his income in Israel as well as his income in the U.S. – even if he does not actually reside in the U.S. All his income will be reported through a U.S. tax return.
Who must file a U.S. tax return?
Employees have different criteria based on their age and marital status that determine the level of taxable income reported to the U.S. tax authorities.
Self-employed living in Israel must file a federal income tax return if net earnings form self-employment (net self-employment income) is above $ 400.
Some things to know about American tax returns
The duty of reporting to the authorities on your income does not necessarily mean that you will be taxed. You may not be required to pay at all. In fact, in most cases there will be no tax liability. However, you are still required to report your income and it is strongly recommended that you do so properly and in due time.
Many American citizens living in Israel are not aware that even if they have never paid taxes to the U.S. authorities, they may be entitled to substantial tax refunds based on such and other criteria.
There is a tax-treaty between Israel and the United States that prevents double taxation. Thus, any tax payable in Israel will be offset against taxes in which a U.S. citizen is liable to the U.S. government.
FBAR report (sometimes called FinCEN Form 114)
Apart from the Annual Report to the Tax Authorities (Form 1040), U.S. citizens residing in Israel may be required to submit another form to the U.S. Treasury Department’s Financial Crimes and Enforcement Network known as Foreign Bank Account Reporting (FBAR). The obligation to fill out this form, which can be completed and sent electronically, applies to every U.S. citizen holding more than $ 10,000 in all of his bank and financial foreign accounts last year.
Guy Dovrat CPA office can assist you with the various reports
The annual report process or FBAR may be complex and complicated and incorrect reporting may have unfortunate consequences. Also, many rights you have with the U.S. government as tax refunds may be revealed to you through professional opinion and after consulting our office’s services. We will provide you with close guidance and help you understand exactly what is required of you and how to exercise all your rights. In order to start enjoying our quality service that may save you a fortune, we invite you to contact us as soon as possible.