Frequently
Asked Questions (FAQ)
Why does the
The tax laws give each taxpayer
a possible refundable(cash) credit of $1000 a year for
tax years 2015 2016 and 2017, and $1400 since 2018. Since US laws are fair and
equitable, even taxpayers who don't owe taxes are eligible to receive this
credit for each child (if their income and the tax laws justify this).
What is the
"American Opportunity Credit" for educational expenses?
Anyone who files a joint return
for tax years starting 2016, where the taxpayer (or spouse if a joint
return) or a US child paid university tuition (or had other recognized educational
expenses), and earned less than about $160,000 (for joint returns) will
generally receive a refund of 40% of expenses paid (for the first $2000 each
year) and an additional 10% of the next $2000, totaling up to $1000. The
"regular" universities in Israel, such as Hebrew University, Bar
Ilan, and Haifa are recognized. [Note that Ariel University is still not
recognized. If anyone hears that they have applied for recognition, please
notify us].
Starting
with 2016 tax year, the application for this benefits must include a copy of
(IRS) form 1098T (which must be issued by the institution), unless institution
has an EIN and is not required to file the form with IRS.
Some American Universities have
agreements with additional institutions which may enable a student to receive
educational benefits. Scholarships may also be available, and it is necessary
to submit a form called a FAFSA to the institution in order to be eligible for
such scholarships.
All taxpayers
must have a Taxpayer Identification Number (SSN or ITIN) issued before the due
date of the return.
When is a child
eligible for (Additional) Child Tax Credit?
Your child is a qualifying child
for purposes of the (Additional) Child Tax Credit if your child meets the age,
residency, dependency and relationship tests.
Age: The child must be under age 17 on December 31 of
the tax year.
Residency: The child must be a citizen or resident of the
Dependency: You must claim the child as a dependent on your
tax return.
Relationship: The child can be your son, daughter,
stepson, or stepdaughter, adopted child, grandchild, or eligible foster child.
Your brother, sister,
stepbrother, stepsister (or the child or grandchild of your brother, sister,
stepbrother, or stepsister) may also be a qualifying child if you care for the
child as if that child were your own. (courtesy
of the
Id Number: The child must have a US id number
(such as Social Security Number or ITIN) issued before the due date of the tax
return, which is generally June 15 for
taxpayers living outside the US unless an extension was filed.
This credit is not refundable
(i.e. cannot cause a cash benefit) if the taxpayer files form 2555 or 2555EZ.
Why should I file a
According to American Law, all
We recommend that all taxpayers
who earn more than standard deduction or who are self-employed should file, as
per US law.
If you and your spouse together
earn more than $3,000($2,500 for 2018 returns), (or you have three eligible
children and one of you is self-employed and pays social security taxes,) you
are apparently eligible for additional child tax credit.
In fact, many people have
registered their children as US citizens in order to be able to include their
children on their tax returns. Note that even children who were registered as
US citizens by a "Report of US citizen born abroad" need to have
Social Security numbers in order to be eligible to receive child tax credit.
Example: If you and your spouse earned combined salaries of
168,000 shekels in 2018 and you had four eligible children, you should have received
about $6,400 additional child tax credit after your return is processed.
Who are we?
Should I use a US based accountant?
We have been preparing US tax
returns in Israel for the past 35 years and have many clients who live in the
US, in Israel, or who live in other countries. Since most of the work is based
on information available on computer via email/FAX/mail, we have clients who
work or live in other parts of the world.
The tax laws are complicated to
the extent that we have found many clients whose US-based accountants were
unaware of many legal intricacies and filed returns which caused our clients to
pay large sums (which we were able to recover).
We do not generally charge for
examining old returns when we prepare returns for current years; in fact we
file returns only when the client benefits from filing (or is required to
file).
We can also help you with
information about Israeli tax ramifications of your
Are you
available in the
Avi can be contacted at +972-2997-5616, or by email avimalek@yahoo.com .
Can I fix an
old return which I filed without requesting the Child Tax Credit?
A return can be filed up to
three years after its due date (so, a 2015 return could only be filed until April(or June) 15, 2019)*. If a return was filed on time or
with a valid extension, it can generally be amended until three years have
passed from the actual filing date (or due date, whichever is later). Filing an
amended return is often more complicated than filing an original return, but we
can generally obtain the refunds when necessary. *Should I amend my 2015 return?
If I have not
filed for years, what will the IRS do when they see my return?
(Will I get
into trouble?)
? Failure to
file a return or filing late can be costly. If taxes are owed, a delay in
filing may result in penalty and interest charges that could increase a tax
bill by 25 percent, or more.
? There is generally no penalty for failure to file if a refund is due.
See the entire article at https://www.irs.gov/newsroom/missed-the-tax-return-deadline-irs-offers-help.
Analysis: If you do not owe
taxes, the IRS will generally not penalize you for not filing. If you were NOT
self-employed outside the United States, a quick examination of your old income
records (in Israel
forms 106) should establish that you did not owe taxes for 2010
and earlier years. The IRS knows that almost everyone residing in
Additional IRS information for
late filers is on IRS website.
If you will be required to file
old tax returns, we can help you. Forms for prior years are available at the IRS website .
What about Foreign Bank Account Reports which I never filed? (There were news reports of an amnesty and a crackdown!)
All US citizens and green card
holders are required to report their financial accounts if the total value of
their financial accounts outside the US is over $10,000, and are required to
report on special forms in the tax returns any interest in corporations and
control of corporations or partnerships. Spouses of citizens who file tax
returns are required starting 2011 to file forms 8338, which are
"super-FBARS", if the foreign assets exceed $400,000 and the couple
file joint returns. A lower filing threshold applies for separate filers.
Spouses are required to file company return forms if they control foreign
corporations. The IRS has stated that penalties will be assessed for willfully
not reporting "overseas" financial accounts and assets. As far as we
have been able to determine, until this date, anyone who did not owe taxes and
mistakenly missed reporting was not fined. The terms of the 2012 Voluntary
Disclosure Program (OVDI 2012) are available of the IRS website. Various news
reports about an amnesty with an associated fine were useful only for those who
owed Uncle Sam large amounts of money on unreported accounts. If, in the past,
had you properly reported all foreign accounts, you would not have owed taxes
to the
What if I
worked in the
If you paid social security for
at least 40 "quarters", you are eligible to receive Social Security
benefits at retirement. It is a good idea to file US tax returns, since the
Social Security Administration may refuse to pay benefits to those who did not file
tax returns. See the SSA website for a
benefits calculator. Note that benefits may be reduced if you are eligible for
a pension based on income for which social security was not paid.
What if I am
self-employed (atzma?i)?
You are required to pay Social
Security taxes to the
Social Security payments are tax free for all residents of
What if I learn
in Kollel?
If you are a clergyman (an
ordained Rabbi is defined as a clergyman), your Kollel earnings may be
considered as self-employment income, which would make you eligible to pay
social security on these earnings (see answer to the previous question). Note
that scholarships (although they are usually taxable income) are generally not
considered earned income, and that income received for studies does not count
for child tax benefits.
If my spouse is
not a
A non-citizen spouse is not
required to report their income to the
In order to report the income of
your non-citizen spouse, you must obtain a Social Security number for them, or,
if they are ineligible for a Social Security number, a TIN (Taxpayer Identification Number).
We can help file a TIN application when you file your first US tax return.
If you have additional
questions, you are welcome to send them via email
with your name and phone number (no attachments please, only text) .
Malek's Tax Information Home Page Malek Office עברית Hebrew
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