Tax Department- FBAR (Form 114)
Foreign Accounts Tax Compliance Act (FATCA)
FATCA is an Intergovernmental Agreement (IGA) that the U.S. Department of Justice has signed with more than 120 partner countries. The purpose of the IGA is to provide the U.S. with knowledge about the financial income and account balances of its citizens around the world. In essence, these agreements create a two-way transfer of information between the foreign country and the U.S. and from the U.S. to the partner country. In effect, the U.S. could demand income tax returns from delinquent taxpayers or non-filers based upon information received from a partner country since the U.S. taxes the worldwide income of its citizens. FATCA requires filing IRS Form 8938 under certain circumstances primarily when there are large financial balances (see below).
Form 8938 (Statement of Foreign Financial Assets)
This form must be filed with your U.S. income tax return (in addition to your FBAR), if you live in Israel (or abroad) and
i) The value in your foreign financial accounts exceeds $400,000 (filing joint) or $200,000 (filing single) on the last day of the year, or
ii) Your foreign financial accounts exceed $600,000 (filing joint) or $300,000 (filing single) at any time during the tax year.
Exchange of Information between U.S. and Israel
Under the Intergovernmental Agreement (IGA) signed between Israel and the United States, an exchange of tax information between the two countries has been in effect since 2016. Israeli banks are now required to issue FORM 1099 to its customers who are U.S. citizens and also transmit these forms directly to the IRS. In addition, Israeli banks are obligated to receive a signed IRS Form W-9 from all of their customers who are U.S. citizens. Failure to provide information requested by your bank could potentially lead to both your bank freezing your assets and the IRS imposing penalties. If your bank does not request you to sign this form you are still required to report your income and assets to the IRS and to the U.S. Treasury. Reciprocally, since 2017, Israel has the right to receive U.S. tax information on its citizens directly from the U.S. Israel has an Amnesty Program for Israeli citizens who have not reported their income earned outside of Israel. Please contact our office for further details regarding filing under the Israeli Amnesty Program.
FBARs
Under the Bank Secrecy Act, a Foreign Bank Account Report (FBAR) must be e-filed annually with the U.S. Treasury by April 15th of each tax year, with an automatic extension until October 15, if the following criteria apply:
I) The person has a financial interest, signature authority or other authority that is comparable to a signature authority over one or more accounts in Israel or another foreign country. Please note that shareholders who hold more than 50% of a foreign company's shares are considered as having a financial interest in the company's accounts, and
ii) The aggregate value of all foreign financial accounts exceeds $10,000 or the equivalent amount in foreign currency (about 37,000 NIS or more during 2018) at any time during the calendar year.
Foreign financial accounts include, but are not limited to, both checking and savings accounts, Israeli pension accounts, brokerage accounts, mutual funds and unit trusts. Paper filings of FBARs (form TD F 90-22.1) are no longer accepted by the U.S. Treasury and have been replaced by online filing of form FINCEN 114.
FATCA is an Intergovernmental Agreement (IGA) that the U.S. Department of Justice has signed with more than 120 partner countries. The purpose of the IGA is to provide the U.S. with knowledge about the financial income and account balances of its citizens around the world. In essence, these agreements create a two-way transfer of information between the foreign country and the U.S. and from the U.S. to the partner country. In effect, the U.S. could demand income tax returns from delinquent taxpayers or non-filers based upon information received from a partner country since the U.S. taxes the worldwide income of its citizens. FATCA requires filing IRS Form 8938 under certain circumstances primarily when there are large financial balances (see below).
Form 8938 (Statement of Foreign Financial Assets)
This form must be filed with your U.S. income tax return (in addition to your FBAR), if you live in Israel (or abroad) and
i) The value in your foreign financial accounts exceeds $400,000 (filing joint) or $200,000 (filing single) on the last day of the year, or
ii) Your foreign financial accounts exceed $600,000 (filing joint) or $300,000 (filing single) at any time during the tax year.
Exchange of Information between U.S. and Israel
Under the Intergovernmental Agreement (IGA) signed between Israel and the United States, an exchange of tax information between the two countries has been in effect since 2016. Israeli banks are now required to issue FORM 1099 to its customers who are U.S. citizens and also transmit these forms directly to the IRS. In addition, Israeli banks are obligated to receive a signed IRS Form W-9 from all of their customers who are U.S. citizens. Failure to provide information requested by your bank could potentially lead to both your bank freezing your assets and the IRS imposing penalties. If your bank does not request you to sign this form you are still required to report your income and assets to the IRS and to the U.S. Treasury. Reciprocally, since 2017, Israel has the right to receive U.S. tax information on its citizens directly from the U.S. Israel has an Amnesty Program for Israeli citizens who have not reported their income earned outside of Israel. Please contact our office for further details regarding filing under the Israeli Amnesty Program.
FBARs
Under the Bank Secrecy Act, a Foreign Bank Account Report (FBAR) must be e-filed annually with the U.S. Treasury by April 15th of each tax year, with an automatic extension until October 15, if the following criteria apply:
I) The person has a financial interest, signature authority or other authority that is comparable to a signature authority over one or more accounts in Israel or another foreign country. Please note that shareholders who hold more than 50% of a foreign company's shares are considered as having a financial interest in the company's accounts, and
ii) The aggregate value of all foreign financial accounts exceeds $10,000 or the equivalent amount in foreign currency (about 37,000 NIS or more during 2018) at any time during the calendar year.
Foreign financial accounts include, but are not limited to, both checking and savings accounts, Israeli pension accounts, brokerage accounts, mutual funds and unit trusts. Paper filings of FBARs (form TD F 90-22.1) are no longer accepted by the U.S. Treasury and have been replaced by online filing of form FINCEN 114.
