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October 28, 2016 / 26 Tishri, 5777

Posts Tagged ‘bank accounts’

Haredi Party Spearheading Effort to Protect Israeli Religious Charities from US Tax Authorities

Tuesday, June 7th, 2016

The heads of charity organizations in the ultra-Orthodox society, commonly known as Gemachim, received at least a temporary measure of relief from the Knesset Finance Committee, chaired by MK Moshe Gafni (UTJ), ahead of a new amendment of the Income Tax Act that takes effect in September and compels Israeli financial institutions to report through the local tax authorities on the Israeli financial affairs of US citizens. The amendment is the result of the Foreign Account Tax Compliance (FATCA) agreement between Israel and the US, which was a prerequisite for continued cooperation between Israeli and American financial institutions.

It’s not much, but MK Gafni demanded that the Finance Ministry and the Bank of Israel order the banks to give the Gemachim time until the end of June to resolve their status as public institutions, which he hopes would allow them to exclude themselves from the FATCA rules. Gafni envisions a tweaking of the amendment to exclude groups with deposits of less than $50 thousand, or holdings worth less than $50 million.

According to Chairman Gafni, the new regulations could bring the collapse of the Gemachim. “The Israeli government signed an agreement with the US government without considering the disastrous consequences for one of the most important enterprises of the Jewish people that has existed for millennia — the charity and mutual aid societies,” Gafni said, explaining that the Gemachim are “the only means at the disposal of a person under financial duress to receive an interest-free loan to get back on his feet.”

MK Israel Eichler (UTJ), Chairman of the Public Petitions, summoned Dr. Ilan Steiner, Director of the Bank of Israel Currency Department, to his committee hearing, to warn him against another aspect of the US attack on these charity institutions. According to Eichler, banks are being forced under pressure from foreign governments to close the accounts of Gemachim accounts, “in the name of ‘fighting terrorism’ and stopping money laundering, the IRS and the American government have become supervisors of all bank accounts around the world including in Israel. Everyone has to go through their inspection, so the Gemachim have received a letter that they will not be able to keep their bank accounts anymore.”

MK Eichler told Dr. Steiner: “I hope that the Bank of Israel find a way to abide by the agreements with the US while not mixing up the Gemachim with the war on terror. The banks must not become a burden and a restriction on associations and charity organizations who want to help people and do not engage in terrorism. There are limits to the madness of the banking system. We must not allow the charity organizations and Gemachim to be paralyzed by American pressures.”

The issues of compliance regarding money laundering and the war on terror stem from the side benefits of an IRS act that was intended to make sure US citizens who make money abroad share some of it with Uncle Sam. According to the IRS, FATCA targets tax non-compliance by US taxpayers with foreign accounts, focusing on individuals’ reporting about foreign financial accounts and offshore assets, as well as by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest.

Using the US’ enormous economic clout, FATCA bullies the world’s financial institutions into reporting on their American clients to Uncle Sam. Under FATCA, to avoid being withheld upon, foreign financial institutions must register with the IRS and agree to report to the IRS about their US accounts, including accounts of foreign entities with a substantial US ownership. Foreign institutions that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA.

Talk about working for the Yankee dollar.

According to The Marker, Gemachim stand to suffer three different ways from the new law: instead of permitting a Gemach to transfer money into their accounts, they could now be questioned regarding the source of the funds and whether or not tax was paid on them in the US; each deposit could be subject to harassment by the bank, in order to verify that it is not part of a money laundering scheme; and the Gemach could be saddled with a new definition as a financial institution, and as such would be compelled to report on its fund sources to the IRS or face criminal sanctions.


‘The IRS Wants YOU’ and Israel Is Going to Help Them

Monday, March 10th, 2014

A mini “economic social” cabinet, headed by Prime Minister Binyamin Netanyahu, soon will approve an agreement to share information on accounts of U.S. citizens with the Internal Revenue Service, sources told the Globes business newspaper.

The newspaper said the proposal will allow the IRS full access on Americans’ accounts in Israeli banks and other financial institutions.

The U.S. government is preparing to sign agreements with other countries as well, but Israel is high on its “hit list,” partly because Swiss banks have accounts in three Israeli banks. Switzerland is no longer a safe place for foreigners to hide their money from the tax man, and so Israel has become a favorite home for money launderers and tax evaders.

The Israel Tax Authority is expecting increased revenues if the measure is approved. “The agreement will include an option under which, subject to certain conditions, information will be sent from the U.S. tax authorities to the Israeli tax authorities about the income of Israeli residents in the U.S.,” the document states.

However, while all information on American accounts in Israel will be sent to the IRS, Israel will receive data only in special cases.

The proposed agreement contained clauses aimed at protecting individuals from the IRS misusing personal information, but it is not clear if the IRS has learned its lessons from recent scandals, such as hunting down those nasty pro-Israel groups, as reported here.

Big Brother in Israel also is waiting on deck.

Attorney Yael Grossman, an expert in money laundering, told Globes, “The decision paves the way for further harm to the separation between the management of money by a bank and disclosure to Income Tax. Although at the moment, the measure helps the banks and saves them the need to work directly with the IRS, but experience shows that it will later expose all of the public’s banking activities to the Israel Tax Authority.

“This will be the final burial of banking confidentiality on one hand and a signal for the strengthening and prosperity of alternative institutions, which will rush to offer alternative instruments to the public.”

Americans living in Israel have an alternative to leaving their tax records and financial activities accessible by your closest friendly IRS clerk. They can simply void their American citizenship, a growing trend that was reported here in December.

Approximately 3,000 did so in 2013, three times the number in 2012. That means the IRS cannot snoop on them, but it also means they lose their right to vote in American elections, assuming it would be worth voting.

Tzvi Ben-Gedalyahu

Three Mistakes that Can Get You in Big Trouble

Sunday, March 31st, 2013

Filing taxes is complicated. The forms aren’t particularly user friendly, and if you’re not quite sure what you’re doing you can end up making quite a few errors. The problem with errors on tax forms is that they can be very costly. For people who have multiple citizenships and residences (think olim or folks who spend a portion of the year living in Israel), the challenges of tax reporting are even more complicated.

I spoke with international tax lawyer Dave Wolf (and fellow contributor to a book on tax guidelines for American expatriates) and asked him, “What’s the worst mistake you’ve seen an expat make?”

He said: “The biggest mistake that I’ve seen expats make is believing that once they move out of America, they no longer have to report their worldwide income or report the existence of foreign bank accounts or companies.” Indeed, when it comes to the IRS, out of sight is not out of mind. It’s also important to note that if you have American citizenship through a parent or grandparent, even if you’ve never lived in America and English isn’t your mother tongue, you’re still obliged to report to the American tax authorities.

Mistake #2

Another common blunder that Dave mentioned was that people look for investment opportunities without taking into consideration the U.S. tax code. Specifically, complicated U.S. tax laws basically prevent American taxpayers from investing in overseas mutual funds. The IRS considers those investments “PFICs,” (passive foreign investment companies), and most Americans who understand how they work would not want to get involved with them or offshore mutual funds. When trying to invest smartly, lack of knowledge of international tax consequences can cost you a lot of money.

Final Mistake

The third blunder people make, Dave said, is “They either go to the wrong adviser, one who has no overseas experience, or they just don’t get any professional help at all.” I asked how you can avoid these mistakes. He said, “Make sure to consult with your tax lawyer, accountant, and/or investment manager before you leave the States to avoid any adverse tax consequences of investing or moving money overseas.” Sadly, many people overlook this seemingly small detail before making what could be one of the biggest financial decisions of their lives.

Find out more about what Dave has to say about avoiding making major tax mistakes by reading The Expatriate Guide to Managing Money and Taxes. For Jewish Press readers, get half off the regular price of the book by using the discount code JPRESS. Go to www.ExpatGuideToMoney.com and order now. The discount will expire on tax day, April 15th.

Knowledge is power, and reading this easy-to-follow guide for U.S. expats you can stay in full compliance with the law.

Doug Goldstein, CFP®

Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/three-mistakes-that-can-get-you-in-big-trouble/2013/03/31/

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