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!

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13 Responses to How much money should you try to make?

  1. bigmo63 says:

    I’m already paying mas hachnasa and believe me, I haven’t made anything close to NIS 200,000!

  2. Amy W. says:

    In the US you must pay federal taxes beginning at WAY below $70k.

    State taxes vary by state. My state (Alaska) does not have a state income tax. Actually, the state PAYS us to live here – this year we got $1,305 per person.

  3. Gidon Ariel says:

    Bigmo: I repeat, I am FAR from an accountant or tax advisor, but some factors that might affect my calculation are number of children [under 18], residence, wife’s income.. In fact, perhaps because my wife did pay mas hachnasa as an employee, I mistakenly counted her income as tax free and added it to my own. Let’s just say that this is the number that Meni (see https://atzmai.wordpress.com/2009/05/22/mazal-tov-submitted-hatzharat-hon-and-doch-shnati/) mentioned for my raf = ceiling.

    BTW, Big Mo of Tzfat? Or perhaps Camp Stone? Or both?

  4. Gidon Ariel says:

    Amy: Same thing – as a parent of 5 living in Israel etc etc, I am way below the IRS radar. I don’t know if it’s 70K or 90K or 50K, I invite my readers to find the link that clarifies this.

    Yes, Alaska is a cool place to live (pardon the expression:-)

  5. sara says:

    Regarding the ceiling for what one can make and NOT pay Mas Haknasah: I believe it’s somewhere around 58,800 NIS for a single woman (a bit lower for a man). One gets additional deductions for spouses, children, being a oleh/olah chadash/ah, etc, but even those wouldn’t bring you up to 200,000. (The 200,000 NIS you mention definitely includes your wife’s income.)

    With Bituach Le’umi: if you make over 17,443 NIS, you need to register for prepayments based on your estimated income. BUT, if you overestimate what you’re going to make, they’ll refund you the difference after the end of the tax year without a problem. (Not sure what happens if you underestimate…I’d rather not try it.)

  6. Jessi says:

    Hi Gideon!

    My name is Jessi and I have come across your website before but today when searching for information on specific atzma’i status, I noticed with pleasant surprise that you have me in your blog roll 🙂 I know I have been in contact before with Jeremy over at Shomer Shkalim, but had no idea that you would also include me! So thanks….I do need to really get on top of publishing more. Really – I’ve been beyond horrible at posting.

    Anyways – I have a question that you may or may not be able to answer for me:

    I myself also am a freelancer, however as far as I know, I’m not any one status or the other. I have always just been referred to as an atzmait. I have a “file” open up at the tax office but whenever I gained a new client, I would get their business number and would be issued a teum mas. This has always been sufficient for what I have done.

    However, I have a new company that wants to hire me on and they asked me to have an osek mershuh status – which from what you have found out and from what I have been told, I need to earn at least 64,000nis/year in order to qualify for this status and while it would be nice to do so, that is nowhere near what I will be making with this company – in fact, in a year, I would only project to make about 18,000nis.

    So my problem lies here – this new company would like me to issue receipts to them (which is understandable) – I normally if a client asks, just write one off Excel or some other billing software I’m using at the time and then send it in and keep copies for my records. However, now I’m worried – do I actually need an official receipt book with my tax status on it? Or can I just purchase one from Office Depot and be done with it?

    Also, this project is only about 5 months in scope, so I don’t know if since I will be under the “radar” as people have been calling it, is it really worth it to go through the whole process of opening a new file?

    Thanks!

    Oh and I shall also be adding you to my blog roll in reciprocation.

  7. Gidon Ariel says:

    Jessie, thanks for writing!

    To get better exposure for your question, i am going to post it as its own post, with my comments attached.

    thanks!

  8. Tzvi says:

    Hi. Bituach Leumi is a little more complicated than that, at least for me. I have been paying BL from my salary as an employee, but was exempt for several years from paying from my self-employed (atzmai) income. My accountant told me than when you are under a certain income you can declare that you work for less than a certain amount of hours a week (maybe ten?, don’t remember) and get an exemption.
    In any case, I guess I earned too much money this year as an atzmai, b/c I have to pay bituach leumi and it’s no small sum. It’s approx a crazy 16%. (You can add it to your expenses though for whatever that’s worth). Also I might lose my osek patur status and that will be a big bummer.
    My accountant estimates cost of a bookkeeper to keep track of ma”am at about 200-250 shekel a month. How much you get back from the ma’am really depends upon the type of business you have. I have very low overhead and i’m not sure I’d break even. It’s also one major headache to keep track of it.
    My accountant also says that if you’re only a little bit over 64000 shekel they might make you pay the ma’am over that amount, but not change your status. Much less than 60000 shekel of my atzmai income is from Israel, the rest being mostly from the US. This makes things even more complicated with ma’am, but IIUC I won’t have to pay the ma’am on the foreign income. I do have to go down to ma’am and talk it out with them. Accountant says she gets the impression from the phone conversation that they’re not interested in making me change my status, I hope that’s true.
    B’kitzur small business who are near the 60000 shekel mark should carefully consider if it’s worth their while to make the few extra “jubot” b/c of the extra ma’am, and possibly BL.

  9. Gidon Ariel says:

    Thanks for this post Tzvi – much of my income in from abroad as well, and I will refer to this when I get close to the 60K mark.

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  11. Michelle says:

    HI,
    I just saw your post, and I know that you are not an accountant…however, I am dealing with a similar issue which I do not want to take on extra work, because I am afraid of losing my osek patur status. However, My accountant told me that the max amount an osek patur can earn before becoming an osek mursha is 99,000 shekel. Have you heard of that number?
    I am a therapist and don’t want to have to pass on mam to my clients…

    • Gidon Ariel says:

      Yes, I am definitely not an accountant:-) The ceiling for osek patur does update from time to time, so I am not surprised to hear that it is up to 99K.
      I am surprised that you can be an osek patur as a therapist; I thought more professional professions like medical and lawyers cannot be. But you know your business:-)

      Good luck in figuring out how to deal with your pricing and maam, it’s a toughie:-)

      I suggest that you post on the Living Financially Smarter in Israel facebook group.

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