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May 31, 2016 / 23 Iyar, 5776

Posts Tagged ‘taxes’

Israel, U.S. Reach Agreement on IRS Regs for Dual Citizens

Thursday, May 15th, 2014

Americans living in Israel, watch out for this year’s June 30 tax deadline.

The Israel Tax Authority has formally reached an agreement with the U.S. regarding the Model 1 FATCA agreement with the IRS, according to attorney Dave Wolf, of the firm Hacohen and Wolf.

The full details of the FATCA Agreement are yet to be published upon the signing of the FATCA Agreement, but according to the Israel Tax Authority’s spokesman, the agreement contains certain restrictions on the use of information passed to the IRS and relief of reporting for certain institutions.

According to U.S. law, all U.S. citizens — regardless where they live — have an obligation to pay taxes on their worldwide income. In addition, in cases where the aggregate value of all foreign accounts exceeds $10,000 at any time during the calendar year, they also have to report this information on a special form commonly known as the FBAR.

Since July 1, 2013, the FBAR needs to be e-filed before June 30 of the following tax year.

Under FATCA, foreign financial institutions (banks, hedge funds, pension funds, insurance companies etc.) are required to report information to the U.S. tax authorities (the IRS) information about foreign accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.

This means the Israeli financial institutions will have to report to the U.S. government all their clients who are U.S. citizens and/or green card holders, disclosing all these accounts.

This has huge implications for any American living in Israel or abroad who has never reported his foreign accounts or paid taxes on its income to the IRS, and also to some states if applicable (such as NY and NJ).

Individuals have four options with which to comply, according to Wolf, who can be reached at this link for more information.

Jewish Press Staff Reporter

IRS Tax Regulations Prompt Olim to Revoke American Citizenship

Thursday, December 19th, 2013

A get-tough IRS policy on Americans living abroad has encouraged some Americans living abroad, including “olim” in Israel, to revoke their American citizenship, the Globes business newspaper reported.

The United States taxes its citizens’ income even if they have been living abroad for years, and agrees with most banks in the world now expose all of their financial accounts to the IRS and make them liable for heavy dual taxation.

One way to get avoid it is to renounce citizenship, which would preclude the IRS from chasing after people to pay taxes on income that does not come from the United States.

Changes in the Israeli tax code also have given big tax breaks to new immigrants as well as Israelis returning to the country.

“Although it is not clear how widespread this phenomenon is, and what relative importance U.S. citizens who immigrate to Israel place on this aspect among the array of considerations that they take into account in deciding to immigrate to Israel, tax residency is certainly a factor,” according to Israeli lawyers Eli Doron and Eyal Peled.

Jewish Press News Briefs

Gas to Pump $60 Billion into Economy in 20 Years, Says Lapid

Tuesday, October 15th, 2013

Israel’s new offshore gas industry will generate $60 billion in revenues in Israel over the next 20 years, Finance Minister and Yesh Atid party chairman Yair Lapid told the Knesset in its first day of the winter session Monday.

He charged the Opposition with damaging the economy by placing obstacles to the natural gas hook-up, which Lapid said will help lower the price of electricity and boost employment.

Taxes on gas will allow Israel to lower taxes, he added.

The High Court is to decide on who has the authority to decide how much of the gas can be exported. Several Opposition parties are demanding that Israel retain all of the gas for domestic use. The government has adopted a policy of exporting 40 percent of the gas.

Jewish Press News Briefs

Legalizing Marijuana Would End Black Market, Says Israeli Study

Wednesday, October 2nd, 2013

Legalizing marijuana would generate more than $450 million annually for the Israeli economy, according to  a new study released by the Jerusalem Institute for Market Studies.

The black market for cannabis in Israel currently is worth $707 million annually, and legalizing the sale of grass, if taxed like cigarettes, would blow $268 million into the government’s money pot. In addition, it would save law enforcement agencies $198 million since they would not have to spend money to smokers of weed.

The study found that approximately 275,000 Israelis, 4 percent of the population, used marijuana in the past year, only 26 percent of Israelis support legalization of marijuana, while 64 percent opposes it.

In the United States, slightly more than half go those surveyed support legalizing grass. Marijuana is illegal under federal law, but 20 states to allow the use of medical marijuana. However, the Obama administration last week gave the green light for Colorado and Washington to carry  out their laws to permit recreational use of marijuana.

The Justice Department said it would bring charges on marijuana only in certain cases, such as distributing it to minors.

The announcement “demonstrates the sort of political vision and foresight from the White House we’ve been seeking for a long time,” said Ethan Nadelmann, executive director of the Drug Policy Alliance, an advocacy group.

The Justice Department added that it is watching Colorado and Washington closely to see  if they can properly control marijuana use.

President Barack Obama has said he smoked grass when he was young, and a federal survey has found that 42 percent of Americans age 12 and older have smoked marijuana at some point in their lives.

The financial gains for states – and Israel is not being ignored,

“Recognizing the enormous financial gains that would come from legalization demands that the government take a serious look at the proposal to legalize cannabis use under specific guidelines,” said Yarden Gazit, who co-authored the study in Israel.  “There is no disputing that if the public is able to get past the wholly negative misperceptions associated with marijuana usage and appreciate the potential benefits with limited social or healthcare costs, this is an idea that needs open-minded and serious re-examination at this time.”

News of the survey coincided with Canada’s launch of controlled medical marijuana, an industry that is expected to be worth more than $1 billion in the next 10 years. Medical marijuana has been legal in Canada for years but has been highly regulated. Now it is available by mail-order with a doctor’s approval.

Besides all of the arguments  over whether marijuana is a drug that can lead to addiction, the underlying desire for governments to legalize it is money.

“We’re fairly confident that we’ll have a healthy commercial industry in time,” Sophie Galarneau, a senior Health Canada official told the Canadian Press.  

The Green Leaf party in Israel has been trying to get into the Knesset for years to push its agenda to legalize pot. In early pre-election polls, it usually receives support that puts it on the brink of winning the minimum number of votes to win Knesset seats, but when the real ballots are counted, it always loses out.

The pro-marijuana campaigns in the United States may generate new enthusiasm to legalize marijuana in Israel, where liberal leaders  almost always turn to American for cultural guidance.

Portland, Maine media reported Wednesday that supports of legalizing recreation marijuana will start promoting their agenda on city buses, with a message that grass is a better and safer alternative to alcohol.

Critics have complained that the campaign should not be on buses because children ride them to school.

Portland’s voter will go the ballot box in November to decide on a proposal to legalize marijuana by 2016. I

The Washington, D.C.-based Marijuana Policy Project has targeted Maine and nine other states in its campaign to legalize grass within three years.

The JTA contributed to this report.

Tzvi Ben-Gedalyahu

Israel’s Tax Hikes Help Cure Smoking and Drinking

Sunday, September 15th, 2013

Finance Minister Yair Lapid raised taxes – again – on cigarettes and alcohol in July, and there already is a change in consumption habits of Israelis, according to a marketing report cited by Globes.

The survey showed that 44 percent of those drink alcohol have reduced their intake, while 60 percent of smokers puff less. The C.A. Marketing Information Institute said that its survey covered a month before the tax hikes took effect and a month afterwards.

The liquor tax hike upped the price of Arak by more than 20 percent, with the tax increases focusing on drinks like Arak, which have a high level of alcohol.

The cigarette tax rose by 18 percent.

The bill for alcohol dropped by more than 20 percent, to an average of less than $40 per person. More significantly, the number of drinkers who said they kicked the habit rose from 17 percent before the reform to 29 percent afterwards.

Five percent of the Israelis Jews told the market survey that they stopped smoking after the tax hike, and one-third said they smoked fewer cigarettes.

The big drawback for Lapid is that he may have killed the goose that has laid the golden egg of reliable tax revenues, but it is worth cost by improving Israel’s health and longevity. Two long-term benefits might be less expenditures on health care and higher productivity at work, as well as a better family life.

Tzvi Ben-Gedalyahu

US Customers Withdraw $4 Billion from Israeli Banks

Tuesday, July 2nd, 2013

Tighter American tax laws have encouraged U.S. citizens to withdraw approximately $2 billion from Israeli banks in less than two years.

“The blow is not just in the drop in assets, but also in the drop in investments. Some of these customers, especially the wealthy ones, use the money to make investments and acquisitions in Israel. There is now little chance that they will make these investments, after they moved the money back to the US,” a banking source told Globes business newspaper.

In some cases, Americans used the money to buy property in Israel, but most of the money was sent overseas.

The Foreign Account Tax Compliance Act (FATCA) at the end of this year will require financial institutions in foreign countries to report bank accounts and assets held for American citizens, who must pay taxes regardless of where they are living. Approximately 100,000  first-generation American citizens live in Israel.

With the absence of a tax advantage by leaving assets in Israel, many Americans began withdrawing their money from local banks

Managed accounts of Americans in Israel are estimated to be valued at billions of shekels.

Jewish Press News Briefs

How to Explain Taxes to Your Kids

Thursday, June 13th, 2013

Benjamin Franklin said, “Nothing is certain except death and taxes,” and just as your children will gradually learn about mortality, they will also find out about taxes and other financial issues.

Like many financial concepts, paying tax may at first be rather difficult to grasp. Indeed, many adults find it hard to accept that the government receives a certain percentage of their hard-earned money before they even see their paycheck. In fact, many question why it’s better to work “on the books” rather than “under the table.”

Paying taxes is a piece of cake.

Try teaching your kids about taxes by relating it to something that they understand and like: cake.

So take them into the kitchen and bake a cake together. Then, explain that this chocolate cake can be compared to the economy. This is the money that belongs to the whole country and everybody needs a slice – the schools, the street cleaners, the hospitals, and the army. Without any “cake,” the government can’t provide any of the things we need.

When you cut a slice for your child, take a small piece off and say that this is like taking a small piece from your wages and giving it back to the country. If no one would part with a small piece of his slice, there would be no cake/money for everybody else. We all use the sanitation services, schools, hospitals, and sidewalks that have to be maintained. As most people wouldn’t simply volunteer to give this money to the government even though they use its services, this tax is levied before you receive your paycheck.

Then ask your children how much of the cake should go back into the government. What if there is a family with a father, mother, and two children? Wouldn’t they need more cake than a single person living alone? And what about a person who gets a huge slice of cake because he has a well-paid job, as opposed to the worker who earns the minimum wage? Would they pay the same amount or would the slice that’s removed be different for each of them?

Once you have used the chocolate cake to illustrate the various ways in which taxes are levied and determined, you and your kids can sit down and enjoy the revenues you have produced. Apart from enjoying a fun time, your kids will learn a very valuable financial lesson…sometimes you can’t have your cake and eat it too.

Doug Goldstein, CFP®

Printed from: http://www.jewishpress.com/blogs/goldstein-on-gelt/how-to-explain-taxes-to-your-kids/2013/06/13/

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