Thousands of Israelis relocate to the United States each year, looking to improve their quality of life, advance financially, and fulfill career ambitions. Israelis that hold a Green Card Visa and have already relocated to the USA are required to understand American taxation in all its aspects and to abide by them. Because of the complexities and complications of the federal income tax legislation, it is advisable to consult with a certified accountant prior to leaving Israel and to begin the relocating process while still in Israel. Are you planning to relocate from Israel to the States? Here’s all you need to know about American taxes for foreign residents.
Relocation to the States, where to begin?
Relocation is a serious life-changing process that affects everyone who’s involved. Many Israelis wonder where to begin while preparing for relocation. The most sensible answer is – at the accountant’s office. Why? Because when you relocate to the States, you also relocate to a new tax jurisdiction and must abide by its rules and regulations in order to be a law-abiding resident. Relocation to the States is a major step. It affects the entire family and must be well-planned in order to avoid disruptions and enjoy a smooth, easy, and pleasant transition for everyone. Even though this transition is complicated and requires one to adapt quickly, many Israelis are willing to face difficulties in order to fulfill their dream of living in America, improve their lives, and give their children better opportunities. And that is exactly why one would want this whole process to be peaceful. Even though relocation is similar to immigration taxation-wise, it usually has a time frame limitation. Therefore it doesn’t require dealing with the Israeli taxes authority’s bureaucracy. It only requires engaging with the IRS and submitting the famous 1040 form yearly.
All about the Federal Income Tax
The American Federal income tax is one of the most important taxes in American legislation. This legislation was enacted after the ratification of the 16th amendment of the constitution in 1913. Although the federal income tax law is fairly new, it is one of the most significant taxes in the States, which affects all American citizens and all legal foreign residents, including Israelis in relocation. The income tax is imposed on everyone – hired employees, self-employed business owners, people who are unemployed, retired, or ill – and on everyone’s income, including profits from all assets, financial or otherwise, interest, dividends, prizes, and inheritances. Israelis in relocation must comply with this important legislation and report their income, their assets, their foreign bank accounts, and their profits as long as they reside in the States and as long as their Green Card Visa is valid.
Get familiarized with your 1040 form.
Each year in the spring, millions of American citizens and residents are required to fill out Individual Income Tax Returns, also known as the 1040 form. This form must be submitted to the IRS on the due date. The information specified in that form helps the IRS determine the residents’ tax liabilities and their scores. 1040 is also important for establishing deduction and return rates. The returns rates can amount to thousands of dollars a year and can be very significant and helpful financially. Many Israelis residing in the States may be a bit concerned about this procedure and this is completely understandable. This process requires concentration, focus, and accuracy, and any flaw in any of the details disclosed – intentionally or unintentionally – may be costly and result in fines or investigations in suspicion of tax fraud. For that reason, it is very important to consult with and certified accountant and to be assisted by him in beforehand.
Paying your taxes and enjoying the relocation
Every Israeli citizen who relocates to the States must report his income to the IRS and pay income tax as long as he holds a Green Card Visa and continue to reside in the States. In order to enjoy the relocation and live a peaceful and successful life, it is important to abide by the income tax legislation and fill out all the required forms annually whether you are a hired employee and whether you are self-employed. It is advisable to consult with an accountant that specializes in all aspects of American tax legislation and to work with him closely and diligently throughout the relocation period.
For more information about double tax prevention agreements
