We are very happy to have Philip Stein as our first expert interview for 2014. Philip is an expert in all US tax matters as related to companies and individuals in Israel. We asked Philip some general tax questions related to the recent changes and topics that have come up lately, and he supplied us with short and insightful answers which make for a quick and interesting read.
Please introduce yourself and tell us a bit about your company.
My name is Philip Stein, and made aliyah from Chicago in 1979. I founded a firm called Philip Stein & Associates in order to serve the US citizen community living in Israel. Today we have expanded to offer US tax compliance services to “Start-Ups”, Israelis investing in the US as well as US citizens living in Israel.
What main changes are expected in the tax law for this coming season that affect Americans living in Israel?
I think the main change is not so much the laws but the IRS’s enforcement of existing laws. The IRS has not only stepped up audits of US citizens living in Israel, but are also assessing penalties for late file of information returns as well as special tax calculations for non US mutual funds.
What are the legal ramifications for someone who does not submit an FBAR?
In the best circumstances, a person would be assessed a penalty of $10,000, if the IRS can prove intent not to file it can be as high as 50% of the value of the accounts.
Is there any real benefit to giving up American citizenship due to these new laws?
The benefits would be three fold; one relief from all US compliance filings, no exposure the additional income and estate tax, and freedom to invest in securities that US citizens are currently prohibited from doing.
What are some ways Americans living in Israel can save on the amount of tax they pay to the US?
One should consider gifting income producing assets to either children (who may be in lower tax bracket) or to one’s spouse, particularly if he or she is not a US citizen
Are there any tax treaties between Israel and the US which can be used to our advantage?
There has been a treaty since 1995, and there are several provisions that can save US citizens tax. The most well know articles concern, social security benefits, annuities, pensions and charity.
When is the latest that tax documents can be filed for companies and individuals in the US?
If you are a US citizen that lives in Israel you can extend your return until December 15th. In order to get this special extension one needs to submit a request in writing no later than October 15th. US corporations and partnerships can only extended until September 15th. For more information on taxes for your business or personal dealings, feel free to contact Philip and his team by going to their website at www.pstein.com. You can also listen to his really insightful podcasts with some great minds here.
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