Work or owning a business in the United States require a yearly tax report to be submitted on income in the United States. In the following article we will explain what a tax ID is and about the process of submitting the report.
When Does the Need for a Tax ID Arise?
One of the consequences of the enormous technological advancements in the last few decades is the option for every person to move very quickly to any place in the world. In some cases, many workers work remotely.
Although, there are those who change jobs and move in order to work in a different place. In these cases, they are required to provide the tax authorities in the place where they live with their tax ID for tax purposes.
What is Tax ID and Why is it So Important?
Every person, Israeli or otherwise, who arrives at the United States as a worker, need to know what tax ID is and must submit a request to receive one. This is short for – Individual tax – payer identification, for tax purposes. In the United States, every citizen has a social security number. This number is relevant for every interaction with the tax authorities in the government of the United States.
This number is used when submitting yearly tax returns to the IRS. The government uses it to tax every citizen. Additionally, the number is used to refund all every citizen that was over – taxed.
The authorities provide a tax ID number for non – citizens and non – green card holders, and this number is a substitute for American social security numbers. The answer to the question what a tax ID is, it is an identification number for tax purposes.
Who Needs Tax ID?
The people who need tax ID are Israeli citizens such as these:
- Israeli citizens who generate income in the United States and have to submit a yearly tax return.
- Israelis who are married to a United States citizen and are required to submit tax returns with them.
- Israeli partners in an American company.
- Anyone who owns profit yielding real – estate or have investments in the United States.
It is important to know that the IRS is not forgiving to those who do not fall under these criteria. In most cases the taxes in the United States are lower than those in Israel.
On the other hand, the tax authorities are meticulous and are unforgiving when someone breaks tax laws. This is why it is important to know not only what a tax ID is but also that it is important to work hard to receive the number and submit all the reports on time.
The Tax Issues That Come with Working in the United States
Technology has made the world a smaller place. One of the obvious results of high mobility is when a citizen of one country is working in a different one. This situation is very common in Europe.
French citizens are working in England, English people are working in Spain and likewise. Israeli citizens as well, work in Europe if they have a European passport. Many Israelis make a living is the United States.
Still, working in the United States immediately raises some questions:
What Currency will the Salary Be Paid In
Usually, the salary for a job in a certain country will be received in the local currency.
Where Will the Taxes be Paid To
Usually, the entirety of the taxes will be paid to the country where the work was done. Although, between Israel and other countries there is a tax treaty that allows each country to receive the tax the other country did not collect.
The Tax ID
ITIN, or tax ID, is a number used for identification for tax purposes and is issued by the American tax authorities. Every Israeli who is not a citizen or permanent resident of the United States is required to request this ID number for the IRS. We will expand on this later in the article.
Despite what was said there are cases where even when the work is actively being done in a different country, is it considered as being done in Israel. For example – a website promoter in Israel who continues doing this work when they are in the United States.
Their life is in Israel, and so are the site they promote and the money they make. Therefore, their tax payment will also be made to Israel. This type of person does not need to know about tax ID because they are already paying taxes in Israel.
What Other Factor Should You Think About When Moving to Work in the United States?
One of the common mistake people make when they get a job abroad is miscalculating their salary and the importance of it. Likewise, the misunderstanding of what tax ID is and the need to report on taxes in the United States.
On the one hand, it is well known that the salary is high, particularly in certain fields. On the other hand, calculating salaries needs to include expenses that have different effects in Israel than is accepted in the United States.
Salary Versus Expenses
Whoever is relocating to the United States need to take into consideration the constant expenses in the United States. The salaries are higher, but the expenses of living could be even higher. The most significant expenses for workers in the United States are health, living, and tax expenses.
Adjustment Expenses
Arriving at the United States, purchasing or shipping furniture, and renting an apartment are only a few of the meaningful expenses when you are getting started. It is important to consider them.
Education and Schools
Anyone who had kids needs to consider their expenses. When it comes to education the expenses in the United States are high.
Taxes
Anyone who works or has property in the United States has to submit a tax return to the IRS for taxing purposes. Differently from what is acceptable in Israel, the tax return submission is a requirement for everyone. To submit the return, you must have a tax ID.
What is the Process of Producing Tax ID?
Now that we have explained what it is, we will explain the process of getting an identification number
Any person interested in getting a tax ID can do it in one of two ways:
Submitting the Request with the First Tax Return
The IRS will receive the tax return and process it while a tax ID number will be produced. While this option exists, it should not be interpreted as the option to submit the report late. Submitting late can cause fines, whether the tax – payer has tax ID or not.
Submitting the request when starting the job or partnership in the United States
In this case, the request submission and receiving the number will be done before the first report is submitted. When it is submitted the tax – payer will already be known to the IRS.
Who submits the request for a tax ID?
Usually, the request is made by the submitter of the report. Although, a large portion of Israelis working or doing business in the United States leave the matter in capable professional hands. These are companies specializing in taxes and preforming the whole procedure that is involved with submitting a tax return.
Those who do that do not need to be familiar with tax ID necessarily and do not need to deal with any of it. All they need is to pass their information along to the company dealing with tax consulting on American taxation. The payment for the service does not reflect on the level of usefulness that a quick, professional, and experienced treatment can have.
