Frequent Asked Questions and Answers (FAQs) about US Taxation:
◊ I am a US citizen living, working and paying taxes outside the United States for many years.
Do I need to file annual US tax returns?
As a US citizen or resident alien, you have an obligation to report your worldwide income, regardless of where you live, in annual US tax returns.
However, you are not required to file an income tax return if your annual income was less than the reporting threshold that is published on the IRS website and is updated annually.
Our US Tax team will be happy to assist you with determining your income tax filing requirements.
◊ I just found out of my obligation to file US tax returns, will I be fined for not filing?
There are several penalties that may be assessed when a tax return is not filed. These include Failure to File penalty of 5% of tax due per month the tax return is not filed (not to exceed 25%) and Failure to Pay penalty of 0.5% of tax due per month. Additionally, the IRS may assess negligence or substantial understatement of income penalties of 20% of tax due when a tax return is not filed.
However, there are certain filing compliance procedures that may be available for taxpayers who have failed to file tax returns, which provide no penalties for late filed tax returns (i.e. Streamlined Voluntary Disclosure
Feel free to contact our US CPAs team who can provide additional information on the various options to file your tax returns and avoid penalties.
◊ I am a US citizen paying taxes in Israel where I live and work, will filing US tax returns lead to double taxation?
The US-Israel income tax treaty prevents double taxation of income tax by allowing taxpayers to get credit on their tax returns for taxes paid in Israel on Israeli source income. If the tax paid in Israel exceeds the income tax in the US, no income tax would be assessed in the US.
However, the US-Israel income tax treaty does not prevent double taxation of self-employment tax, so US citizens who earn income from self-employment may still be taxed in the US on their self-employment net income, regardless of taxes paid in Israel on such income.
Our US Tax team can address your specific tax situation and offer tax planning for reducing or even eliminating your tax liability.
◊ I am a US citizen and so are my children, am I eligible to get a refund using the Child Tax Credit?
A US citizen can claim his/her US citizen children, who have Social Security Numbers, as dependents on his/her income tax returns. In order to receive the Child Tax Credit, there are a number of factors to consider, such as the children’s age, the taxpayer’s earned income amount, etc.
Our tax professionals team includes highly experienced US CPAs who can assist you with determining your eligibility for the Child Tax Credit.
◊ I surrendered my green card after a long-term residency in the US. What are my obligations in terms of US tax filing?
For tax purposes, you are considered a long-term resident of the US if you were a green card holder for at least 8 out of the last 15 years ending in the year your residency ends. Long term residents who surrendered their green card may be subject to exit tax in the US if they meet certain income and asset tests. Alternatively, green card holders who permanently live in Israel may claim to be treated as non-US residents as per the US-Israel tax treaty.
◊ I am a US citizen living in Israel. Do I have a requirement to report to the IRS the value in my Israeli bank accounts?
US citizens and resident aliens are required to annually report the value of their foreign financial accounts be electronically filing the Report of Foreign Bank and Financial Accounts FBAR. This requirement applies if the aggregate value of all foreign financial accounts exceeds $10,000.
Failure to report the value of the accounts may lead to civil fines of up to $10,000 for non-willful failure and the greater of $100,000 or 50% of the highest balance in each unreported account for willful failure to file.
Our US CPAs are highly experienced in FBAR filings and can assist you in complying with FBAR filing requirements and avoiding the hefty penalties even if you failed to previously file FBARs.