Navigating U.S. tax obligations can be complex, especially for Americans living in Israel. Understanding who is required to file is the first step toward compliance. The U.S. operates a worldwide taxation system, meaning certain individuals must report their income and assets, regardless of where they reside.
Who Must File?
U.S. Citizens & Green Card Holders (Permanent Residents)
All U.S. citizens and Green Card holders, including those living in Israel, are required to file an annual U.S. federal tax return.
This obligation applies even if you’ve lived abroad for decades or earn no U.S.-based income. You must report worldwide income, including salaries, business profits, investment income (e.g., interest, dividends, capital gains), and rental income from properties, whether earned in Israel, the U.S., or elsewhere.
Even if income is exempt from taxation in Israel under local laws, it must still be reported to the IRS.
Additionally, U.S. citizens and Green Card holders must disclose foreign financial assets held outside the U.S. This includes Israeli bank accounts, pension funds (e.g., Kupot Gemel), Hishtalmut funds, manager’s insurance plans (Bituach Menahalim), and investment holdings.
These assets may require reporting through forms like the FBAR (Foreign Bank Account Report) or FATCA (Foreign Account Tax Compliance Act). For expert guidance on these requirements, MasAmerica offers specialized FBAR filing services and FATCA compliance support.
Foreign Investors & Promoters in the U.S. Real Estate Market
Individuals or entities investing in U.S. real estate, such as shareholders in a U.S.-based LLC, must file federal tax returns and, in many cases, state and local returns.
This applies to Americans in Israel who own U.S. rental properties, invest in real estate partnerships, or promote real estate ventures. LLCs, in particular, have unique tax reporting requirements, as they are often treated as pass-through entities for tax purposes.
Failure to file can lead to significant penalties, especially for non-residents managing U.S. assets.
What is a Filing Obligation?
A filing obligation refers to the legal requirement for U.S. citizens, Green Card holders, and certain foreign investors to report their income and financial assets to the IRS.
This system has been in place since 1913, when the U.S. introduced income tax reporting for citizens worldwide. Unlike most countries that tax based on residency, the U.S. taxes based on citizenship, meaning Americans in Israel remain subject to IRS oversight.
Since 1974, additional reporting requirements have applied to foreign financial accounts. The Bank Secrecy Act introduced the FBAR, mandating disclosure of foreign accounts exceeding $10,000 at any point during the year.
In 2010, FATCA further expanded reporting by requiring individuals to disclose foreign assets exceeding certain thresholds (e.g., $200,000 for single filers living abroad). These obligations ensure transparency and prevent tax evasion, but they can be daunting without professional support. MasAmerica’s U.S. tax services simplify compliance for Americans in Israel.
Why Now?
The urgency to file U.S. tax returns has never been greater, particularly for Americans in Israel. Since September 2016, Israeli financial institutions have been required to share financial information about U.S. citizens and Green Card holders with the IRS under FATCA agreements.
This means the IRS now has unprecedented access to data on your Israeli bank accounts, pensions, and other assets. Non-compliance is no longer a hidden issue—it’s a matter of when, not if, the IRS will notice.
If you’ve missed filings in previous years, now is the time to act.
The IRS offers amnesty programs, such as the Streamlined Filing Compliance Procedures, which allow you to correct past non-compliance with reduced or no penalties. These programs are a lifeline for Americans in Israel who may have been unaware of their obligations.
However, amnesty is only available if you act before receiving an IRS notice or audit request. MasAmerica’s penalty relief services can guide you through these programs to minimize financial exposure.
Delaying compliance risks triggering IRS audits, which can lead to hefty fines or legal action. With Israeli banks actively reporting to the IRS, proactive filing is the smartest move.
What Must Be Reported?
U.S. tax filings require comprehensive reporting of worldwide income and foreign financial assets. This includes:
- Income Sources:
- Salaries earned in Israel or elsewhere
- Business income from self-employment or partnerships
- Investment income, such as interest, dividends, and capital gains
- Rental income from real estate, whether in the U.S., Israel, or other countries
- Foreign Financial Assets:
- Bank accounts (checking, savings, or fixed deposits)
- Pension funds, including Israeli Kupot Gemel
- Hishtalmut funds and manager’s insurance plans
- Holdings in foreign companies or trusts
- Accounts where you have signatory authority, even if not personally owned
These assets may trigger additional forms, such as Form 8938 for FATCA or FinCEN Form 114 for FBAR. MasAmerica’s tax preparation services ensure all required forms are filed accurately and on time.
Key Deadlines
Staying on top of U.S. tax deadlines is critical to avoid penalties. Key dates include:
- April 15: Federal and most state tax returns are due for U.S. residents. If you owe taxes, payment is required by this date to avoid interest and late payment penalties.
- June 15: U.S. citizens living abroad receive an automatic extension for federal tax returns, but taxes owed must still be paid by April 15.
- October 15: Extended deadline for federal tax returns and FBAR filings, provided you request an extension by June 15.
Penalties & Consequences
Non-compliance with U.S. tax obligations carries severe consequences, particularly for Americans in Israel who may be unaware of their responsibilities. These include:
- Financial Penalties: Failure to file tax returns or report foreign accounts can result in fines ranging from $10,000 per unreported account under FBAR to millions for willful non-compliance. FATCA violations carry additional penalties for undisclosed assets.
- Criminal Charges: Willful failure to file can be classified as a criminal offense, potentially leading to prosecution and imprisonment.
- Passport Revocation: Under recent U.S. legislation, the IRS can request the revocation of U.S. passports for taxpayers with significant tax debts (over $62,000 in 2025).
The stakes are high, but proactive action can mitigate these risks. Filing delinquent returns through amnesty programs or correcting past errors with professional help can prevent these outcomes. MasAmerica’s expert tax advisors specialize in helping Americans in Israel navigate these challenges.
Act Now
Compliance with U.S. tax obligations is not optional—it’s a necessity. With Israeli banks reporting to the IRS and stricter enforcement in place, now is the time to ensure your filings are up to date. Whether you’re a U.S. citizen, Green Card holder, or investor in U.S. real estate, MasAmerica offers tailored U.S. tax solutions to simplify the process. Contact our team today to file your returns, correct past filings, or explore amnesty options before the IRS takes action.
