A little twist on our regular ” blog” focus on Israeli technology. This time we want to highlight an interesting development — how the Israeli Tax Authority is focusing on social media to target tax avoidance. This may well be predictive of how IRS auditors could approach the examination of a return.
Did you post on Instagram in an attempt to advertise for your nail polish/gel or hair beauty services? Are you using Facebook in order to search for new tenants for your apartment?
Unreported “small business” such as homeowners looking for renters, bridal gowns sales, beauticians, private teachers, etc., has led to tax evasion worth millions of shekel a year and researchers from the ITA have begun monitoring posts on Facebook, Instagram, Twitter, and other networks.
As social media has become a place for free and easy advertising, the ITA has found it relatively easy to track advertisers and businesses, in their attempt to catch tax evaders.
Not only are the tax authorities able to follow the posts, but they are also able to follow up on the responses posted by the customers. Recently, the ITA discovered two wedding dress salesrooms after satisfied brides posted pictures in their dresses in order to express their gratitude to the salon. The investigators who saw these publications checked to see if the salons had registered to sell these dresses- within one month they discovered at least eight bridal gowns, worth thousands of shekels, which had not been listed in the business books.
One of the hottest areas in recent revenue growth is the rentals of apartments or rooms by the day(s) and/or hour(s). The ITA claims that apartment owners collect millions of shekel of income renting apartments, and are only obligated to pay income tax in cases when the monthly rent collected is above NIS 5,090. On the contrary, owners who rent for individual days must operate as a business: opening a file in the tax authority and paying the rent they receive from the first shekel of income.
As you can understand from the recent exposure of the ITA’s use of social media posts, it is extremely important to remain tax compliant at all times. This is true with the US tax authorities (IRS) as well.
We at MasAmerica can provide options for those who have not been fully compliant in the US and can present strategic planning for individuals who run independent businesses to help them reduce their US tax burdens. Contact us with any questions you may have.