How much money should you try to make?

Obviously, the answer is as much as you can.

But I have recently noticed that there are a few bureaucratic bodies who care how much I make, and charge me. And some of them charge me more if I make more than a certain amount (in some cases, they charge me nothing if I stay clear of that minimum), and some charge me more (relatively) if I make less than a certain amount.

To clarify:

VAT only “charges” me if I make more than about 60,000 NIS a year. (Yes, I realize it’s more complex than that, they don’t really charge me etc, but for the sake of my own radar, let’s keep it at that.)

Bituach Leumi charges me a minimum of about 80 or 110 NIS a month (I can’t remember and can’t be bothered to go find the paper that hinted at this number). This is even if I make 80 NIS a month, or less – even someone who is unemployed is required to pay National Insurance premiums monthly. And once you make more than 17,443 NIS a year, your premiums go up (not sure how much, but it starts at about 6% I think (that’s about 1000 [the premium you pay annually for up to the minimum income rate) divided by 17443 (the minimum income you start paying more than the minimum premium on).

Here are the other offices that care about my income as an atzmai (and even as an employee, for the most part):

The IRS: Evidently, if you are a US citizen, you are required to complete an annual tax return. In principle, you will owe no income tax if you make less than some amount (depending on number of dependents etc.) For me, this number seems to be a walloping $70,000 or $90,000, whatever, they are both pie in the sky right now. BUT, you are entitled to up to $1000 per child rebate (I use the good help of Jeff Melamed for this http://groups.yahoo.com/group/ustaxreturnREFUNDS/). That “Up To” depends on your income. When you start making less than a certain amount, then your rebate per child is less. This depends on the number of kids you have etc. etc., my “aim for” amount to get the the maximum is about $46,000 a year household income.

FBAR: This requirement is not a tax, it is simply a reporting requirement. If you have a cumulative balance of more than $10,000 in all of your overseas (i.e., not USA) accounts, including banks, keren hishtalmut, and dunno what else, you have to report all of these accounts. You get to the cumulative balance by finding the highest recorded balance of each account for the year (say, Feb 15 for one bank, Dec 31 for the just-put-in account) and adding them up. This thingie got a lot of press this year, because it is the first time they are clamping down on enforcement, with draconian penalties threatened. (If you are interested, I checked my balances for every year since 2003, the year they are checking on since nowadays, and I was only on their radar for 2 of those years). (This link is a good start if you haven’t heard about this until now: http://muqata.blogspot.com/2009/06/us-citizens-in-israel-have-you-filed.html)

Doch Shnati: As I have blogged here before (most of this blog is about this), if you keep pretty good records of your income and your spouse’s income, then go ask for help towards the deadline during Mas hachnasa’s free advice hours, you should be OK. BTW, for me, I think I would have had to staert paying Israeli Income Tax at household income of no less that 200,000 NIS a year.

So, if you have the same factors as me, then here are the annual numbers that raise a flag:

17,443 NIS – what to aim for if you want to pay the lowest amount percentage and cash-wise for Bituach Leumi.

60,000 NIS – when an Atzmai moves from being an Osek Patur to an Osek Mursheh.

$10,000 – FBAR reporting requirement

$46,000 – household minimum to get the maximum Child Tax Credit refunds

200,000 NIS – start paying Israel Income Tax (Mas Hachnasa)

$70,000 – start paying US Income Tax

DISCLAIMER: I wrote most of the above from my own limited knowledge, with barely even using Google. I hope I haven’t made any glaring mistakes, and I will appreciate any corrections and additions.

Comment away!

Obviously, the answer is as much as you can.

But I have recently noticed that there are a few bureaucratic bodies who care how much I make, and charge me. And some of them charge me more if I make more than a certain amount (in some cases, they charge me nothing if I stay clear of that minimum), and some charge me more (relatively) if I make less than a certain amount.

To clarify:

VAT only “charges” me if I make more than about 60,000 NIS a year. (Yes, I realize it’s more complex than that, they don’t really charge me etc, but for the sake of my own radar, let’s keep it at that.)

Bituach Leumi charges me a minimum of about 80 or 110 NIS a month (I can’t remember and can’t be bothered to go find the paper that hinted at this number). This is even if I make 80 NIS a month, or less – even someone who is unemployed is required to pay National Insurance premiums monthly. And once you make more than 17,443 NIS a year, your premiums go up (not sure how much, but it starts at about 6% I think (that’s about 1000 [the premium you pay annually for up to the minimum income rate) divided by 17443 (the minimum income you start paying more than the minimum premium on).

Here are the other offices that care about my income as an atzmai (and even as an employee, for the most part):

The IRS: Evidently, if you are a US citizen, you are required to complete an annual tax return. In principle, you will owe no income tax if you make less than some amount (depending on number of dependents etc.) For me, this number seems to be a walloping $70,000 or $90,000, whatever, they are both pie in the sky right now. BUT, you are entitled to up to $1000 per child rebate (I use the good help of Jeff Melamed for this http://groups.yahoo.com/group/ustaxreturnREFUNDS/). That “Up To” depends on your income. When you start making less than a certain amount, then your rebate per child is less. This depends on the number of kids you have etc. etc., my “aim for” amount to get the the maximum is about $46,000 a year household income.

FBAR: This requirement is not a tax, it is simply a reporting requirement. If you have a cumulative balance of more than $10,000 in all of your overseas (i.e., not USA) accounts, including banks, keren hishtalmut, and dunno what else, you have to report all of these accounts. You get to the cumulative balance by finding the highest recorded balance of each account for the year (say, Feb 15 for one bank, Dec 31 for the just-put-in account) and adding them up. This thingie got a lot of press this year, because it is the first time they are clamping down on enforcement, with draconian penalties threatened. (If you are interested, I checked my balances for every year since 2003, the year they are checking on since nowadays, and I was only on their radar for 2 of those years). (This link is a good start if you haven’t heard about this until now: http://muqata.blogspot.com/2009/06/us-citizens-in-israel-have-you-filed.html)

Doch Shnati: As I have blogged here before (most of this blog is about this), if you keep pretty good records of your income and your spouse’s income, then go ask for help towards the deadline during Mas hachnasa’s free advice hours, you should be OK. BTW, for me, I think I would have had to staert paying Israeli Income Tax at household income of no less that 200,000 NIS a year.

So, if you have the same factors as me, then here are the annual numbers that raise a flag:

17,443 NIS – what to aim for if you want to pay the lowest amount percentage and cash-wise for Bituach Leumi.

60,000 NIS – when an Atzmai moves from being an Osek Patur to an Osek Mursheh.

$10,000 – FBAR reporting requirement

$46,000 – household minimum to get the maximum Child Tax Credit refunds

200,000 NIS – start paying Israel Income Tax (Mas Hachnasa)

$70,000 – start paying US Income Tax

DISCLAIMER: I wrote most of the above from my own limited knowledge, with barely even using Google. I hope I haven’t made any glaring mistakes, and I will appreciate any corrections and additions.

Comment away!

Don’t Worry, Be Happy!

Someone posted this as a comment somewhere on my blog, and I thought it can be halpful as a post. Bevakasha!

1. ari Says:
   
   hi gidon.

   i’m planning on heading out to the tax offices now to register as an atzmai’i. any advice as i head down this potentially bankrupting, forcing-me-to-move-back-to-the-U.S.-shekeless-road?

2. Gidon Says:
   Hi Ari,

   Good luck in your endeavors!

   I don’t know the nature and scope of the work you intend to do, but in general, registering as an atzmai is not potentially bankrupting!

   Especially, my “expertise” (sic) is about osek za’ir, which means small business, less than about 60,000 NIS a year (income or profit, or somewhere in between), about 5,000 NIS a month. If you make so little, then chances are the authorities will not require payments or even fines that will bankrupt you.

   This blog focuses on interfacing with bureaucracy, not financial success of your business. As a friend of mine once wisely said, he hopes he gets taxed a lot, because that means he is making a lot.

   If your business idea and execution are sensible and market-driven, then you will probably succeed.

   If you add advice from NBN, MATI, various blogs and websites to that mix, and don’t “jump over your pupik”, then you have a good chance at success, and will probably not be forced to move back to the US without a dime.

   I am sure you wrote some of your comment tongue in cheek, but keep your chin up, be optimistic, and good luck!

A Little IRS/Mas Hachnasa Dovetail

Yesterday was the last day to submit the FBAR (see http://muqata.blogspot.com/2009/06/us-citizens-in-israel-have-you-filed.html). I had heard a tiny bit about it over the past few weeks, maybe even got an email or two from a few friends, but there was certainly not enough buzz about it here in Israel (think 2008 US Presidential Elections) for me to actually look into it. But then I read the blog post I referred to earlier int his post, spoke to a neighbor, and decided I better file.

Now, first of all, I have a little experience filling out US tax type forms, as I’ve done some administrative work for a lawyer, so I’m familiar. And of course, as you know, I recently submitted an Israeli Hatzharat Hon assets declaration. I expected this FBAR to pretty much take the same info about my bank accounts and other accounts (like kupot pensia and hishtalmut) that my Hatzharat Hon did. And – I think I was right!

The form did not take 20 minutes as the “time burden” notice on it claimed, closer to an hour or two, but had I not submitted a Hatzharat Hon a month or so before, I would either have given up, or given that I was afraid of a $10K fine(!), I would have gone crazy.

An observation: if you really have your life in order, knowing your budget and sticking to it, documenting what needs to be documented, etc., then you don’t get surprised too much. In fact, you get happily surprised sometimes.
What do you think? Leave me a comment.

New Ptor from Mikdamot

I got a notice in the mail saying:

Re: Postponement (Hash-hayah) of Increase of Prepayments for Tax year 2009

Your 2008 tax return was received in your file.

We see that it justifies increasing your pre-payments to 16%

according to clause 180 B 1 in the Income Tax Code.

Please check the correctness of these details, because if you do not do so by 3 July 2009, that increase will be activated.

Now, this surprises me, because, as my loyal blog readers know, I made much less than the 50,000 NIS ceiling requiring pre-payments (in fact, requiring payments at all!), and I was told that I would NOT need to make prepayments.

I assume this is just the system justifying itself.

Anyway, I found a great blog that explains what to do in plain English:-), so I found the post that talks about submitting a request for an exemption (ptor) from prepayments. Unfortunately, I had not written the name, phone number, or fax number of the person I needed to be in touch with, so hoping that she won’t retire by next year, here is the info:

For Jerusalem area small businesses (NOT Jerusalem itself!) you have to use Pkid Shuma Yerushalayim Shtayim (#2) which is near the Tachana Merkazit (actually, next to Center One)

Hebrew info page:  http://ozar.mof.gov.il/taxes/cities/jeru.asp

So I filled out the form 2216/א at http://www.mof.gov.il/taxes/tfasim_mas.htm, called 02-5019203, spoke to Gilad (probably Tekoa, the Deputy Tax Assessor) who told me to send a fax to “Attention: Dafna” at 02-5019250.

My guess is that that will do the trick.

I will bli neder report back here when I get the official letter saying that in fact I am exempt from prepayments, or if they decide that I must prepay.

If anyone wants me to spend time translating Form 2216A, please ask.

Mazal tov! Submitted hatzharat hon and doch shnati

After my first visit to the Tax Authorities for initial guidance session a few weeks ago, I realized that my thirty day extension was coming to an end, and i should go back for a hopefully final guidance and assistance session and submission.

I could not get through to verify what the hours were, I assumed it would certainly be open at least til noon. When I arrived, the guard said guidance hours were from 4-6pm , no day hours. Well, I decided to try my luck.

Of course, it wasn’t luck, just preparing. Since I made friends with Meni the last time, I went straight to him and asked him if he could help me a bit even though it’s not helping hours. He squirmed a bit, but said ok, while he’s doing other stuff. I thanked him profusely, and proceeded to have what seemed to me to be a regular helping session:-)

First we finished the doch shnati annual tax return.

My situation is relatively easy. I had all of my income through my receipt book, less than the taxable minimum, so the grand total went into one field for that.

My wife has a salaried position, so I had her tofes 106, annual income summary.

On this tofes 106, there are descriptions of payments or deductions, the amount for each, and the Code of each.

Meni told me to look for each Code on the tax return form, and copy the amount into the field of that code.

Simple as that!

I signed it (the employee spouse did not need to sign it), showed it to Meni, he said it’s good to go.

By then, Meni had to go into a meeting with his Boss, so he handed me over to an equally nice colleague of his, Ilan, who would help me with my hatzharat hon, net worth declaration.

(To remind you, the hatzharat hon is taken every five years from atzmaim to see in general terms if you have a lot more stuff than you should based on your declared income since your last hatzharat hon. For me, this was my baseline.)

Ilan took my folder (actually, I prefer plastic A4 sized sleeves) of anything dealing with insurance and savings, looked at each page, said “submit this” and put an X next to what I need to submit (usually a sefach tear-off) or “this is not relevant.”

Then he said to add up all the amounts he X’ed, andd list them as a summary under Insurance.

Luckily, I had brought my latest mortgage mashkanta statement, which he said to submit and list under Debt.

I also sumitted the Report of Dec 31 Bank Balance which I got for free from Bank Hadoar, and had to pay 55 NIS to Bank Discount for ($%$*!!!)

Then I wnt to photocopy everything I was about to submit the original of (30 agurot a copy, machine returns change, no line), and then helped someone who thought I worked there with her Tax Return. I told her, here is a case of the second grader teaching the first grader:-)

Then I took my two forms and attached documentation to the Inforation and Submission clerk, he nicely took and stamped it (even though I was about 3 minutes after his break was to start) and That’s It!

Sorry for not scanning or otherwise finding the Hatzharat Hon form and Tax Return form and annotating them, but hopefully this rambling post will help you.

Paypal and U.S. Checks and Israel Income Tax

As I mentioned in my previous post, the Tax Authority advisor, Meni, and I discussed Paypal yesterday.

Meni had never heard of Paypal. So I filled him in a bit on that, and on my business model. Some of you may (and all of you should) have a similar model.

I have a website through which I offfer a service (http://www.holycityprayer.com; the service being membership in our organization. Among other benefits, we pray for our members in the Holy City of Jerusalem). Most members pay through Paypal. Some others pay by US Dollar personal checks.

In principal, you must give your customers an official receipt from your receipt book at the instant of the transaction, that is, the moment you get the cash or check and your customer gets the service or product.

However, in my model, I don’t get the money; [my account in] Paypal does.  Then, every so often (when my partner and I decide to do a distribution), I move some of that money from Paypal into my US bank account. When I want some of that money, I write myself a check and go to the local gas station 9who has a Change [foreign exchange desk] and get cash.

Some of my customers make very small payments (as little as $7 a month) and I am not interested in such frequent bookkeeping.

I suggested the following solution and meni said it’s ok:

When I transfer funds from my Paypal account, I will issue HolyCityPrayer.com a receipt for “services rendered <date of last transfer> to <date of current transfer>.” This will not be more frequent than once a month, and the internal accounting and clicks I have to do are so relatively complex and manifold, that writing a single receipt in my receipt-book will not add significant effort. And when I cash customers’ personal checks, I can also issue my receipt to HCP – my customers abroad hardly care about this Hebrew scrap of paper.

I’d love to hear your comments about this.

Mas Hachnasa advice hours

Sorry for not posting in such a long time, I hope this post will make up for that a bit.

Around February of this year, I got a form in the mail, a Hatzharat Hon (declaration of wealth/assets). I was at the Tax Authority (Rashut Hamissim) for something else, so I found a pakid who I could talk to about that. He basically said I have until May to fill it out and return it, so I immediately filed it in the “don’t think about until April” part of my brain.

About a week or two ago, I got about five forms in the mail, which looked like a tax return with a few appendixes. Since I had hit Snooze on my Hatzharat Hon alarm in my brain a few times, I figured I’d better get cracking.

So I  opened both forms, put a little “X” next to the lines that I was certain were NA (not applicable) for me (like “Profits from Owning Real Estate Abroad”); completing the lines I could easily (like “First Name”) and circling the line numbers of things I wasn’t sure of, whether requiring searching on my part (like “Balance Of Personal Bank Account On 31 December 2008″) or clarification by a Tax Authority advisor.

Then a flyer fell out of my folder, one that I picked up the last time at Mas hachnassa that I never really looked at. It said some thing to the effect of: “Free Advice Hours For Filling out Your Tax Return.” Just what the doctor ordered. However, I saw that it said “Every day from March 1 through April 30, 4-7 PM. Pessach Closed.”  Well, yesterday was April 27, today is Yom Hazikaron and tomorrow is Yom Haatzmaut, not days to expect service at government offices. So I made quick plans to go there (needless to say, calling any number I had or could find was useless). Then I saw that the flyer I had said “Mar 1 thru Apr 30 2008“! So I realized that my trip might be in vain, but I felt I had no choice.

I made not-so-good time, and arrived at Tax HQ at about 6:20 (and I still had to daven mincha:-). The guard said “you only have a few minutes left, hurry to the sixth floor.” One person was speaking with the pakid, so I was next on line. Another citizen or two arrived after me.

I spoke with Meni.

Bottom line: If you are a male atzmai, and you made less than 45,000 NIS last year, you are under the Taxman’s radar. As I thought, they won’t require you to bring all sorts of receipts etc. your declaration is enough. (A female atzmai [atzmait, actually] would ostensibly have a higher ceiling.)

Since I only had issued receipts during 2008 totaling about 12K  NIS (ok, I was busy with personal stuff, ok?), I was clearly under this radar.

BTW, Meni said, my wife, who is an employee, has a much higher ceiling – closer to 100K(!). She actually comes somewhat close to that (which is how we actually get to eat most of the year, thank God), but still low enough to keep Meni uninterested.

So all I have to do to complete the tax return (doch shnati – tofes 1301) is fill out a few lines on her side of the pages according to her tofes 106 (summary of financial statement for employees, provider by employer), and add some other income that Meni and I agreed that I should declare (via Paypal – see other post). I will come back to advisors’ hours after doing that, go over it with Meni (or whoever’s on duty, everyone I’ve met is great), finish anything else I need to on the spot, and come home and post to this blog:-)

Having such a small income, being under the Taxman’s radar, means that I don’t have to pay any income tax this year. The down side is, that I don’t get any tax rebates (they can’t refund me if I didn’t give them any).  This includes donations to tax exempt charities.

Important BTW – the deadline this year has been extended to May 30 2009. Whew!

Bottom line: Being an Osek Patur can still be costless, accountant-wise.

PS I made Mincha at the Tachana Merkazit:-)

Questions and comments are welcome!

Bituach Leumi Take Two

As you know, it’s not what you know, it’s who you know.

To paraphrase, a different pakid can get you the information that you need in 10 minutes that another one couldn’t in an hour.

The last time I went to Bituach Leumi here in Maale Adumim, my number came up and I was steered to the noticeably younger of two pkidim. After the fact, I thought that I should have gone to the older one, assuming he would have been the more experienced, and therefore more able to understand my question and provide me with a satisfaqctory answer. That’s because the younger pakid seemed to have done neither. I walked away that day with a completely unclear task list, no answer to my question[s], a certainty that I would aim to be steered to the older pakid the next time, and a perhaps a subconscious decision to put off going back to Bituach Leumi for a long time.

Today I finally went back. I had to get some info about my father, and figured I might as well try to get the info I was looking for before and do the things I should do at the same time.

Well, the younger pakid wasn’t there today, but there was a younger pkida and an older pakid, probably he was the same one as the last time. I aimed at him and got him! But when I started explaining that I am an atzmai, he said “go to the pkida.” Oh well.

But, this time it was all for the best, because Ortal was very patient and helpful, and knows her stuff.

So, without further ado, here is what I learned!

1. You can either be an atzmai or not a atzmai.
2. If you are an atzmai, you either are an atzmai that is oneh lahagdara (fulfills the criteria) or is eino oneh lahagdara (doesn’t fulfill them). The only difference is whether or not you are covered in the anaf nifgaei avodah (department of work injury insurance).

1. I am an atzmai. (Remember, osek zair, patur, and mursheh are only relevant for VAT. For Mas Hachnasa, Bituach Leumi, and maybe others, there is no difference).
2. The hagdara/criteria:
A. works at least 20 hours a week, even if you make close to zero money.
B.  Works at least 12 hours a week and makes at least 15% of the average wage (about 1200 NIS a month).
C. Works at least an hour a month and makes at least 50% of the average wage (about 4000 NIS a month).
If you filfill one of these criteria, you will pay about 10% of your monthly net income, but no less than 148 NIS a month.
If you don’t fulfill any of these criteria, you are an atzmai she-eino oneh lahagdara, and you pay 141 NIS a month, a percentage of the average monthly salary (schar hamemutza bameshek).

I’m not sure what the work injury insurance actually covers, but 8 NIS a month sounds like a bargain, so I am going to declare that I work at least 20 hours a week. Chances are, I can aim and succeed in getting 1200 NIS a month, but I can also declare the 20 hours a week work clocking (websurfing and emailing = research and development of my business).

I will scan a copy of the form you have to fill out and comment on it and translate it. In the comments, we can discuss your situation and see if you should do differently from me!

A little update

Well, we had a small road accident, a Pesach vacation, a police headquarters relocation, a lot of other business, and good ol’ laziness keeping me from making progress here.

What I’ve done:

1. Concluded that the official Osek Zair receipt book comes in size 400 receipts only. (Isn’t that STUPID?? Anyone who is an osek zair is not going to have so many transactions by definition!) I am hoping that I’ll either find a smaller receipt book (25 receipts is a suitable number), get advice from someone that a Word or PDF receipt is acceptable, or bite the bullet and buy the 400 receipt book.

2. I’ve filled out form 2216 A (see http://atzmai.wordpress.com/2008/04/06/a-little-update-about-mas-hachnassa-specifically-getting-a-ptor-from-mikdamot/)
and scanned it and prepared the cover letter and even found the name of the Chief Tax Collector at my tx office. Now I’m waiting to find out his email address..

3. I got a comment on my first post by the well known Anglo Israeli CPA Yitzhak Treister. Hopefully he will share many knowledgeable tidbits with us!

4. I formatted a standard Sefer Takbulim Vetashlumim into an Excel spreadsheet. More on that later.

A little update about Mas Hachnassa (specifically, getting a ptor from Mikdamot)

As you might remember, i was told during my consultation at Mas hachnasa that I probably will be awarded a ptor (release) from paying mikdamot (monthly prepayments) because I expect to make less than 50,000 NIS this year.

As I wrote:

1. If you project to make less than the minimum to require tax payment, you can disregard the Pinkas Mikdamot (pre-pay tax stub booklet) and request to be relieved of prepaying at the Gvia department. (I’ll blog about my doing this, of course).

Anyway, if I remember correctly, I sent an email or filled out a contact form at the Mas Hachnasa website, and got an email back to fill out form 2216/א at http://www.mof.gov.il/taxes/tfasim_mas.htm and give to the Goveh Rashi  (chief tax collector) at the relevant office. So I downloaded it, filled it out, and started trying to figure out which is the relevant office, and who is the goveh rashi there, and how can I get this form to him in the easiest acceptable way (=fax or scan and email).

I called up the number Ms. Ciwi mentioned (quoted in my last post here) and found out that they only answer the phone between 8 and 1. Or, perhaps more logically, they will not answer the phone at any time besides then (talmudists will realize that they might not answer between 8 and 1…)

I hope to report here success in getting my ptor. Meanwhile, I continue to not pay my mikdamot, hoping that inaction now will not cause me more required action later…