I apologize for not updating this blog as frequently as I should. Please submit your request for your money back in triplicate:-)

Anyway, great news!

As I had a feeling would happen, Mas Hachnasa has extended the deadline for submitting the doch shnati tax return. It was scheduled to be April 30, 2011. This was three days after the end of Pesach, and Shabbat, by the way.

Anyway, nu nu nu I was a naughty boy and didn’t submit my form till then.

But as I said, I had a feeling it would be extended.

So today I succeeded in finding a phone number where someone answered. 02-6559559 ext 6 then 2. That brought be to Galia in the Mateh, and lo and behold, she answered the phone!

So I asked her if there has been an extension. She said I think so, wait a sec. She asked a colleague and he said yes (get this) till June 30! That’s right, not one month, but TWO MONTHS extension!

You can all go back to sleep now.

BTW, you have to submit it by Internet online starting this year. Bli neder, I will report how (easy it is) to do this.

Dear Chana Leah,

Thanks for writing, sorry for the time lag in responding, I guess you get what you pay for:-)

I have been reading your blog on-and-off for a while. I just opened an osek patur, but I am still working in a regular “sachir” job part-time. I wanted to ask you the following: Will this affect the taxes that I will pay at my sachir job or as an osek patur?

>>I remind you, my “advice” is not professional, just my educated guess. Depending on your salaried income, it probably will not impact. I don’t have the exact numbers, but from what I understand, if your combined income is under a certain number, you do not pay more. See below>>

If so, do I need to visit Te’um mas or any other office to fix this?

>>The question isn’t how much tax you will pay, but how much people will withhold from you. Ultimately, around Pesach you will go to the free advice hours, and they will help you complete your tax return (doch shnati) and tell you how little if any tax you will have to pay. But until then, you should go the Mas Hachnasa and get a teum mas, so your salaried job won’t deduct more than he should, and your clients won’t think they have to withhold at source (nikkui mas bamakor). Getting a teum mas is painless, just takes time. I understand that you can do it online nowadays. Taxes.mof.gov.il or something like that.

Thanks for your help, Chana Leah

Thanks, Gidon Ariel

Gidon, thanks for your blog, it’s really helpful! I am at the point of making my decision now – patur or murshe. and before i go to a tax advisor i’d like to know as much as i can. Can you please advise, whether osek patur can have deductibles like partial car expenses, gas, electricity, office rent, etc? I do not mean VAT, but reduction of the final profit i’ll get to pay taxes from? Or the taxes are calculated from my “brutto” income?

Someone also said, i cannot do web site support and development as osek patur, even if i get less than64k a year. Is it really so?

I’ll really appreciate your help.

Here’s my answer:

Remember, I am not an official tax advisor, just a fellow shnook who tries to help and be helped;-)

From my understanding, an Osek Patur makes so little money, they are patur (not required to) collect and foward/pay VAT tot he VAT authorities. This comes to about 64K NIS a year (give or take a few 10k’s).  From my understanding, if you are making so little money a year, you are not going to be paying mas hachnasa to the mas hachnasa authorities, either. So “deductibles” are immaterial. The idea of deductibles is to deduct their value from your brutto gross income, and then calculate the tax you owe. Since you are starting with zero tax owed, you can’t go lower than that:-) PS this is what happens to me and so I am lax with collecting “deductible expense” receipts like cab fares, ink, computer, etc.

If you do end up owing taxes cause you make more than the minimum, than the bottom line is easy: was this expense instrumental in generating income for you. Would you have been able to generate income without expending for this. The partial expenses you list are maybe hazier than an ink cartridge, but you can and should ask on internet forums, this is a simple question.

>>Someone also said, i cannot do web site support and development as osek patur, even if i get less than64k a year. Is it really so?

Don’t tell that person about me, that’s exactly what I do:-) My declared business (iirc – they strangely do not give you a copy of your request to open a business including the field where you describe your services – I spent about an hour crafting that sentence!) was “Office Services, Translations and Internet services”.  I think “sherutei Internet” should do the trick for you too.

The stats helper monkeys at WordPress.com mulled over how this blog did in 2010, and here’s a high level summary of its overall blog health:

The Blog-Health-o-Meter™ reads Fresher than ever.

Crunchy numbers

A Boeing 747-400 passenger jet can hold 416 passengers. This blog was viewed about 3,100 times in 2010. That’s about 7 full 747s.

In 2010, there were 8 new posts, growing the total archive of this blog to 25 posts. There were 2 pictures uploaded, taking up a total of 358kb.

The busiest day of the year was March 4th with 41 views. The most popular post that day was How much money should you try to make?.

Where did they come from?

The top referring sites in 2010 were shomershekalim.wordpress.com, lifeinisrael.blogspot.com, bigextracash.com, facebook.com, and bsemploymentinitiative.blogspot.com.

Some visitors came searching, mostly for osek patur, mas hachnasa, paypal taxes israel, teum mas, and yeul sachir.

Attractions in 2010

These are the posts and pages that got the most views in 2010.

How much money should you try to make? October 2009
10 comments

Osek Mursheh, Zair, or Teum Mas? January 2010
4 comments

Opening a Tik Osek Patur at Maam March 2008
4 comments

Mas Hachnasa advice hours April 2009
3 comments

Paypal and U.S. Checks and Israel Income Tax April 2009
6 comments

It deals with nonprofit orgs, but I think it’s a well written description of something worth knowing, and I think some of you might to.

Here’s to Shuey:

http://nonprofitbanker.com/terminology/israel-terminology/defining-an-amutah/

As many of you know, Rachel Berger is a senior executive (to use Old Countryspeak) at Nefesh Benefesh, and if I haven’t plugged that organization until now on my blog, my bad, here it is.

Anyway, somehow I came across this guide, and then found it was barely findable, so I am assuming Rachel won’t mind my posting it here. As a non-professional, I do not attest to the correctness of her writing, nor of mine, blah blah blah. YMMV.

********************************************

Date: Aug 21 2009 – 5:46pm

Establishing a Business

Step 1: Opening a File for VAT
To open a Tik (file) for Ma’am (VAT), you will need to go to the local tax office. To find the local tax office, check online or in a phone directory under “Mas Hachnasa” (income tax). You will need to bring your Teudat Zehut (ID card) with you and fill out forms with the required information. The type of Tik that you open depends on how much you plan to make a year, i.e., the scope of your business.

If you expect to make under 70,000 NIS: Open a Tik for an Osek Patur, which means that you are exempt from Ma’am and – basically – do not need to interface with the income tax offices, which is very convenient. You will need to buy a Pinkas Kabalot (receipt book) so that you can issue receipts for your clients. A Pinkas Kabalot can be found in any office store. can will use the receipts from this Pinkas for bookkeeping purposes.

If you expect to earn over 70,000 NIS: Open a Tik for an Osek Morshe. You will receive an official Ma’am book. Clients will be charged Ma’am and you will basically be required to forward the Ma’am that they pay to the Ma’am office. When you sign up, make sure to ask the exact details of where and how you make the payment.

Step 2: Mas Hachnasa (Income Tax Authorities)
To open a file as an Oved Atzmai (freelancer) , you need to take the Osek Patur or Osek Morshe certificate to the Mas Hachnasa (income tax) office. Find the department in Mas Hachnasa that handles freelancer, and fill out the necessary paperwork. Once you’ve completed the registration, you will be required to submit a tax form once a year, which you will be receiving in the mail from the tax office.

Buy an accountant book – Sefer Tikbulim V’Tashlumim – at any office store, and use it to keep track of your payments and expenses. If you are careful about recording your transactions, it will make it easier to fill out the annual tax form.

Save all of your receipts and relevant paperwork, for a period of seven years. While noone wants to be audited, it does happen, and the only way to protect oneself is by saving all of the necessary documents.

An Atzmai who works from home can deduct some expenses from home bills such as electricity, internet, phone costs, Arnona (property tax), etc. The percentage of the deduction is based on the area used for the business. For example, if a house has four room and one of the rooms is used for business, the deduction that is recognized would be a quarter of the total cost. For more information about what can be deducted, speak to a qualified accountant.

Step 3: Bituach Leumi
When you open a file at Mas Hachnasa, a file is automatically opened for you at Bituach Leumi (National Insurance Institute).

The Bituach Leumi office will send you a form requesting your employment details, including any pay stubs that you have, and an Ishur (statement) from the bank providing that you are the owner of your bank account.

Once you submit this form, Bituach Leumi deducts 9% to 16% of your income as either Bituach Leumi or Mas Briut, depending on how much money you earn. The exact amount that will be deducted is listed on the Bituach Leumi website (HYPERLINK “http://www.btl.gov.il/”www.btl.gov. il).

Step 4: Declaration of Capital
Approximately every four years, you will be asked to submit a declaration which indicates your net worth, including your earnings and any properties that you own. It is recommended that an accountant with expertise in Hats’harat Hon prepare this form on your behalf.

Rachel Berger
Senior Career and Business Developer
NefeshB’Nefesh

I apologize to you, my faithful readers, for not updating this blog more frequently, not to mention for not providing more significant and relevant and helpful (and authoritative) information. You can dock my salary:-)

Seriously, I would appreciate feedback, which would motivate me to write more…

Now that we’ve gotten that off of my chest, here are my comments on completing a Doch Shnati Annual Tax Return:

1. So far, far the second year running, the deadline has been extended from April 30 till May 31. This might be the third year running, or perhaps this happen every year, but I’ve only been watching this year and last. A little odd, as it is hard to imagine a reason to extend that they couldn’t have foreseen, but Welcome To Israel, I guess..

2. Unfortunately, I did not photocopy my Doch Return form from last year, or at least I cannot find it:-), as having it with the questions I had might have made things easier for me this year. The good news is that it ended up being not that hard at all anyway.

3. Here are the questions that I wrote down and got answered by Zehava when I went for the guidance hours:

Line 3: What is the sum that my wife reports (her Tofes 106 has a whole bunch of numbers)

Sections Daled through Yod: Need I cross out the fields that I do not have to fill out?

Line 43: Is this relevant for my wife?

Line 45: Is this relevant for me?

Line 62: Is this relevant for my wife and me?

Line 67: Donations – need I bother submitting?

Line 69: I live in Maale Adumim – is this relevant?

Line 70: Is this relevant for my wife and me or just for me?

Line 71: What do I report for my wife, and is this relevant for me (I did some work during the national elections for a party, they said the 25% tax [ouch!] is definitely non-refundable)?

No line: Need I complete form 1320?

4. The answers:

Sections that I do not need to fill out do not need to be crossed out – don’t bother.

The lion’s share of my questions dealt with my wife’s tofes 106. (Lines 3, 43, 44, 49, 50, 64, 71). Here is the solution, which would have saved me a lot of time with Zehava, and will save you time:

Every line on the Doch Shnati form has a field, often two (for the filer and for his/her spouse). Each field has a code number clearly associated with it. For example, line question 43 has field code 218 for the filer and 219 for the spouse.

NOW, look at the Tofes 106 – every relevant line has a Mem Heh code associated with it. Guess what – that Mem Heh stands for Mas Hachnasa! And guess what – those code numbers match the code numbers on the Doch Shnati form that I discussed in the last paragraph! So all you have to do is connect the dots. Every line in your spouse’s Tofes 106 that has a Code Mem Heh in it, find the identical code on the Doch Shnati, and copy the sum on the Tofes 106 belonging to that code number into the associated field on the Doch Shnati. Simple and fun as that!

I hope this is as clear as it is to me.

The only other questions I had:

Line 45: my Bituach Leumi payments: well, since I know I am below the minimum, I know my payments are about 100 NIS a month. Zehava wasn’t too worried about my reporting the exact total of my payments to Bituach Leumi, so I just wrote down 1300 (one month for good luck). YMMV – you should look this up in preparation for filling out the Doch Shnati and get it exact.

Line 62: Bituach Hayyim Life Insurance: I will find the annual reports I get from the companies that send me for my wife’s and my policies, I expect that there will be a Mem Heh code on those pages too, at least it shouldn’t be too difficult to figure out what numbers go in these fields. As with the philanthropic donations below, this information should result in a tax refund!

Line 67: Charity donations: find all the receipts of donations to Malkarim (NPOs) that say “mukar letzarkei mas hachnasa” and submit them in the original, you evidently get a third back if you have donated more than 400 NIS this year. (if you donated less than about 10% of your income, you should consider upping your donations. Thus spake your conscience:-)

Line 69: Maale Adumim is not a special area, probably just Sderot and Kiryat Shmoneh, but YMMV. Couldn’t hurt to fill out if you think it might be helpful.

Line 70: I just copied from Line 1 – my reported income (sum total of all receipts issued as reported in my receipt book). Form 1320 is a worksheet that helps you clarify your deductions (like transportation, office supplies, etc. – expenses needed to generate income). Since I knew my gross income before deductions was low enough to report as is without calculating deductions, I just did that. Hopefully next year I will happily fill out form 1320:-).

Line 71: In fact, the 25% tax paid on work for political parties is unrefundable. Ouch indeed.

SO… My action items are:

1. find those Life Insurance annual receipts and enter the relevant number in fields 036 and 081, Line 62.

2. Find all my charity receipts and enter the relevant number in fields 037 and 237, Line 67.

3. Complete my personal details in the Yesh Lershom Pratim Adkaniim box (the third section on Page 1). Zehava had kindly pasted my sticker in the section above this.

4. Complete the Bank Details on Line 76, so they can deposit my refund (yay).

5. Submit the Doch with spouse’s Tofes 106, Life Insurance original receipts, charitable donations original receipts, and tofes 1320, to the Information Window at mas Hachnasa, 216 Rehov Yaffo, sixth floor. Get it stamped and get a Meushar certified copy.

6. Do all this before June 1.

PS I see that last year’s entry might be helpful too:

http://atzmai.wordpress.com/2009/04/28/mas-hachnasa-advice-hours/

http://atzmai.wordpress.com/2009/05/22/mazal-tov-submitted-hatzharat-hon-and-doch-shnati/

Here’s a site/page that looks good too:

http://www.plusfinances.com/Income-tax.html

PS from this page: http://atzmai.wordpress.com/2008/06/26/bituach-leumi-take-two/ I learned that I am actually probably paying 148 NIS a month to Bituach Leumi. I should review this blog more often!