Israelis with foreign income and Americans living here are being urged to come forward and make voluntary disclosures, following separate announcements of new amnesty programs by the Israel Tax Authority and US Internal Revenue Service last week.
Never before has there been such a good opportunity to comply with authorities, two tax experts who specialize in services for English speakers told The Jerusalem Post Tuesday.
The Israel Tax Authority last week extended its temporary amnesty on reporting foreign income from June 30 to September 7. It will allow anonymous applications to be made during that period, so that one’s tax liability is calculated prior to their formal application for the amnesty.
“Is this attractive? Very, very much so,” Jeff Broide of Jerusalem-based Broide & Co.Certified Public Accountants said. “Going by what is happening in the tax world today, and not only in Israel – there is incredible transparency and a lot of exchange of information – this is a pretty cost-effective way of making everything kosher. This certainly is an opportunity for Israeli taxpayers to set the record straight.”
Broide said he would advise clients with any meaningful source of foreign income to apply for the amnesty, as anything other than compliance is “high risk.” Even people with low-income assets should file a report, he advised, as they might suffer penalties if they make substantial gains off the future sale of those assets, without having declared them previously.
The Israel Tax Authority has been much more generous than its American counterpart because it does not charge any interest or penalties, Broide said. But there is a downside, he added, as the ITA’s program goes back to 2003 – which means applicants could be billed for up to nine years of back taxes.
The IRS announced that it will create a new voluntary disclosure program on September 1 for non-resident US taxpayers “presenting low compliance risk.” To qualify, taxpayers must prove they owe no more than $1,500 for any of the covered years by filing tax returns for the past three years and a declaration of foreign bank accounts (FBAR) for the past six years.
Philip Stein, president of Israel’s largest US CPA firm Philip L. Stein & Associates, said: “In my opinion the IRS has come to the conclusion that there are still people out there who have been dissuaded [from applying for previous disclosure programs], people who never filed, who really didn’t owe any or owed very little tax, and this is attempt to entice them back into system.”
Stein said it was still unclear how the program would operate, but advised that Israeli-based Americans who have never filed a US tax return or FBAR organize their files and contact a professional before the program begins.
For those who work in Israel and have very little investment income in the US, it is unlikely they will have to pay any back taxes, he said.
He added that the most the IRS can claim under this program is 25 percent of annual taxable income – or a maximum $375 – plus around 3% interest.