Israeli American Citizens Must File US Tax Returns

Did you know that Israeli American citizens must file US tax returns annually?  This also applies to US permanent residents living in Israel. For the past few years the US Internal Revenue Service (IRS) has started to track down US citizens in Israel who have failed to file US income tax returns.

What you need to know

According to US tax law, all American citizens, even those who do not live in the US, must file annual income tax reports (referred to as citizen-based taxation).  This also applies even if you earn all of your income outside of the US. As a practical matter, most Israeli-Americans living in Israel will not owe any US taxes because they pay taxes to Israel.  There are a few exceptions to this rule, so it is important to check with an accountant or lawyer who can help you address these situations. Even if you do not owe any money to the IRS, failure to report your income can result in hefty fines!

Some people have even considered renouncing their US citizenship to try and bypass the headache of filing annual tax returns and other taxes and fines imposed on US citizens regardless of whether they live in the US.  However, it is important to note that you cannot renounce your US citizenship to try and get out of paying US taxes, as expatriation is only permitted if you have filed tax returns for the past five years.

What you need to do

It is imperative for all US citizens, dual citizens in Israel, and US permanent residents in Israel to file annual income tax returns!  If you have failed to file over the previous years, you can also back file and catch up so as to limit any fines that may be imposed on you for lack of compliance with US law.   Many such people mentioned above are eligible for the foreign earned income exclusion, which simplifies the process, but to take advantage of this exclusion, the US citizen or permanent resident, you must file the tax returns on time.  As a US citizen or permanent resident living in Israel, you have an automatic tax filing extension for the previous tax year until June 15, although any taxes you owe must be paid by April 15. If you need an additional extension to file your tax returns, you must request this, and this will give you until October 15 to file your taxes.

If you have children who are US citizens, filing your annual income tax return is not only the right legal step to take, it can also come with benefits.  Many Israeli-Americans living in Israel will owe no taxes to the US, but can actually receive money back by claiming the child tax credit.

Contact us

If you would like assistance filing your tax returns, please contact us.

We at Cohen Brosh Law Offices have extensive experience helping Israeli American citizens catch up on their tax returns and file their annual tax returns, and we would be happy to help you.

Picture of ג׳יימי כהן

ג׳יימי כהן

Skip to content