Now that I am no longer working by contract, this setup is not so feasible. As a full-time employee of the US-based company, I am now receiving my salary directly into my bank account in the US. Social Security and Medicare are deducted as part of my pay check. I can take part in the 401K. And I still have to pay Israeli taxes (since starting a few years ago, all Israeli citizens are required to report and pay taxes on global income).

(In theory, I could have gone on as before, either as part of the Israeli corporation, or by forming my own Israeli corporation. However, part of the reason that my company wanted me full-time was to simplify their own accounting and end the necessity of international wire transfers. Thus, that option was out).

I have no way to legally exempt myselft from Social Security (which, in theory, I could one day collect, assuming that it is still solvent in 40 years, and they are still paying out benefits to overseas recipients) and Medicare (which I will probably never collect, since you can only use it in the US and I now live in Israel). Oh well. My loss (5+% of my salary, coming out taxable income. Not fun).

As a citizen of Israel, I have to pay taxes to Mas hachNassah (the Israeli IRS). Although I have heard different opinions on how this should be done, my accountant advised me to do this as if I was an independent worker. I am registered as an atzma’i (independent worker). Every month or so, I make income tax pre-payments based on a formula provided by Mas hachNassah (this changes year-to-year, based on my reported income from two years before, which is the most recently tax year for which I have filed an income tax return). I also pay bituach Leumi every month, also as an atzmai. At the end of the year (or to be precise, the end of January for the following year), all of my taxes are due. This does not mean that I have to have already filed my income tax return. It means that I should pay the difference between the sum of my tax pre-payments for the previous year, and what I (or my accountant) estimates to be my full tax liability. If in the end (ie: my tax return is completed and filed) I underestimate this and have not paid up fully by the end of January, I will owe the difference plus interest. If I overpay, I will get back the difference (with interest). All of these payments can be done online through my bank (or in person at the post office).

One good thing (or at least, something that is not bad) is that any pre-tax deductions that I make off of my salary in the US (like 401k) is also pre-tax for Israel, since my Israeli income is based on my reported US-taxable income. So it pays for me to make a large deduction or 401k, since it will end up being a pre-tax deduction for both Social Security/Medicare, as well as Israeli taxes (if I signed up for an Israeli pension plan as an independent worker, this would also be pre-tax for Israeli taxes, but not for SS/M).

Unfortunately, from what I have heard, I can’t get any Israeli tax deductions for working from home, without jumping through hoops and inviting an audit. For expenses, the best thing to do is to get directly reimbursed by your employer.

Something to keep an eye on that could change things drastically from a tax liability situation: Currently, all Israeli citizens, including olim, have to pay Israeli taxes on global income. In my situation, this means that I need to pay Israeli taxes on my income earned in the US (described above). As the Israeli income tax rate is significantly higher than the US-rate for the same income, I end up paying thousands of dollars more in income tax to Israel than I would to the IRS. However, there is a proposed law before the knesset right now that if passed will exempt new immigrants from having to pay taxes on any non-Israel sourced income for a ten year period post-aliyah. And even if this passes, it is not yet clear whether or not this will apply to me retroactively for the duration of my first ten years in Israel. If it does pass, and it would apply to me, then I would not have to pay Israeli income tax for my main salary. Though I would have to pay the IRS, the lower rate in the US would save me thousands of dollars a year. (This would be nice, but I am not getting my hopes up – however, for those of you considering aliyah, this is something to pay attention to).

That’s all for now on this topic. And of course, I am not an accountant, don’t come to me for tax advice, etc, etc.

When we get there we open the door and there are two people there doing sponga on the floor, mopping up and cleaning the area. Other than them, there are no nurses, no doctors. No one. They look up at us (a little bit annoyed at the interruption) and ask: “could you come back in 10 minutes? we are cleaning right now”. Adina and I both look back incredulously – “are you serious? Can we come back in 10 minutes? We are in labor!!”. “Is it urgent?”, they ask. “Well, we are not having the baby in the next few minutes, and contractions aren’t too painful yet”. “OK, so then please come back in 10 minutes”. (Which we did, at which point there were nurses, and everything proceeded accordingly).

Moral of the story: the night shift goes home and the first day shift comes on at 7am. Apparently this is a sacred time when no new patients – even ones in active labor – are allowed, as the new shift must say hello to each other, get their coffee, have a meeting etc. So if you are in labor and have been having contractions all night and intend to go to Shaarei Tzedek Hospital (and I presume any other hospital in Israel), please time things so that you do not arrive at the hospital between 7:00-7:20am (unless you want to meet the sponga people).

• How do I get an American company to pay me a salary or hire me as a contractor while I am living in Israel?
• How do I get anyone to pay me a US-level salary while I am living in Israel?

You are on your own to answer those (my advice: daven, try to build up a good relationship with your employer before heading East, and if it is at all feasible for you to continue as an employee or contractor post-Aliyah, bring it up with them early, be creative and accommodating in trying to explore possible solutions. But don’t wait until your kids are through with college in the hopes that something will work out.)

However, if you are (or could one day be) in the employment situation that I have found myself in since making aliyah, the following should be of interest to you.

My Scenario

Before aliyah I worked for almost two years with a consulting company in Boston. About four months before we left I went to my boss and informed him of our plans, as well as my openness to any type of arrangement that would allow me to continue working for them. After a little back-and-forth we agreed that I would continue working as a contractor. I would be officially working as a contractor for a third company, who did virtually all of the programming work for my former employer. My work would either be in support roles (drawing an hourly salary) or based on projects. At the time that I left (last December) we didn’t have anything formal worked out for how payment would get to me in Israel.

Tax Repercussions

From what I was able to find out, it was very much in by best interests to be am employee of an Israeli company. Here is why:

Social Security Tax: If you are en employee of a US-based company, and you have ever looked at your pay-stub, you will notice that a portion of your monthly pay is deducted and sent to the US government for Social Security and Medicaire dues. Your employer is bound by law to match your contribution every month. The total amount of your salary that is sent (paid by both yourself and your employer) is 15.3%.

However, if you are an independent contractor you have to pay both the employers and the employees portion of your salary for Medicaire and Social Security – 15.3% of your total income. In the eyes of the Social Security Administration, it does not matter whether you are working in the US or abroad. Either way you have to pay this amount if you are self-employed (ie: you need to fill out a Schedule C with your Federal Tax return).

This is not necessarily a bad thing. You need to amass 40 credits (with each credit equal to one quarter of work, in most circumstances) in order to qualify for social security benefits after you retire. If you are close to 40, you may decide that it is worth your while to pay the 15.3% in order to amass more credits, and qualify for benefits.

In my case, I have somewhere around 20 credits, meaning that I would have to contribute for at least five more years in order to qualify for benefits. When it comes down to it, SS is just a form of saving for retirement. If your employer is contributing on your behalf, it is extra attractive. However, for me, I can think of more efficient uses for the 15.3% my income that would be sent to Uncle Sam (and would hopefully still be there when God willing, I retire sometime around 2040-2050).

In order to not be responsible for Social Security dues, one must be employed by a foreign company (since working for a US company you are liable, and being self-employed overseas you are also liable).

Self-Employment in Israel

In the US, if you are self-employed you get your 1099′s in the mail at the end of the year, fill out a Schedule C, make your deductions and send in your papers. No big deal.

In Israel however, it is a big deal:

• You have to file taxes at the end of the year (if you are employed by a company, in most cases they deduct all of your taxes and you don’t have to file anything at the end of the year!)
• You must open a tik. This means that you go to the proper government office(s), fill out lots of paperwork. You have to make a capital declaration (ie: tell them how much money you have in the bank, list all of your valuable possessions). They make you do this so that in theory they could knock on your door in a few years, check out all of your possessions, and try to estimate whether you could afford all of your stuff on the salary that you have reported.
• In many cases, you have to charge people VAT (Value Added Tax) of approximately 15%. This is definitely not good for business.
• You will have to make partial tax payments throughout the year.
• All of the things that would ordinarily be deducted from your paycheck at a company (like bituach leumi, bituach minhali, keren hishtalmut, etc) would become your headache

You avoid all of this by working for an Israeli company

So how can I work for an Israeli company and a US company at the same time?

I’m glad you asked [snicker].

Here is what has to happen:

1. You become an employee of an Israeli corporation. Fill out a tax form. The works.
2. You sign a contract with your US-based company/client (or skip the contract and trust them, if that is what works for you) for the work you will be doing. The contract is between the Israeli corporation and the US company.
3. At specific intervals (once or twice a month, project milestone or completion, etc) you send an invoice to the US company for the amount due. The invoice is payable to the Israeli company (of whom you are an employee).
4. US Company wires over (or sends a check, though I wouldn’t recommend it) the money to Israeli Company’s bank account.
5. Israeli Company does lots of accounting stuff (yes, that is the technical term). They figure out how much income tax your owe, how much bituach leumi, etc. They do all of your deductions. When they are done with that, they issue you a pay-slip and move the money (minus an agreed upon monthly accounting fee) over to your bank account.
6. Rinse, lather and repeat (hopefully for many years).

Other advantages to this system:

• It is perfectly legal, with very little risk on your part of messing up (unlike the case where you are self-employed in Israel, where there is a pretty good chance that you will mess up with your taxes once or twice).
• You get all of the benefits of working for a company. In a socialist country, this is a good thing. There are specific deductions that you can make, and certain types of pre-tax contributions that can be done on your behalf that are simply better when you are part of a company.
• They take care of all the details for you. That is hours (of aggravating tax work) every month saved
• You can have access to pension savings and insurance plans that you otherwise not be able to use
• You get professional looking monthly pay slips which are mandatory if you need to do things like take out a mortgage

How can I find an Israeli company that will allow such an arrangement

I have heard of three options:

1. Your brother-in-law/uncle/best friend’s cousin/(you get the picture) owns an Israeli company and agrees to serve in this role for you
2. Start your own company
3. Find a company that specializes in this type of arrangement.

If you want to do either of the first two options, you are on your own. I am right now doing option number three, and so far it is working out pretty well.

There is one company that is pretty well known that specializes in exactly the scenario that I laid out for you. It is called Yeul Sachir. On the surface it looks pretty good. They (now) have a nice looking front page to their website. They claim that they have been doing this for years and their rates are the cheapest you can find (I remember that it was around $100 a month). When I first decided to look into this option I tried contacting them. The email on their English website (which has thoroughly unimpressive layout and functionality) was not valid. I scoured their Hebrew website, sent an email to another (different address) listed there. Heard back from their CEO. Asked him for some references. He said he would get back to me. Called a few weeks later and asked what I thought. I said “you never sent me the references”. He said “sorry, I will do that right away”. And I never heard back from him again after that. (Update: It looks like they have taken down their English website. No big loss, since it was not the most informative or well-laid out site, but it does indicate that in the future they may not be catering as much to Americans. The only English that I could find on their website are links to english copies of the freelancing contracts – I cannot link to them because they use Flash only for their navigation, but if you want to get there, go to their main page and click on the link at the top labeled ??????? ????????? – Solutions for Freelancers. Beyond that, I do not know much about how their business works, if they still want to server US freelancers, etc. If anyone has experiences please let us know)

Suffice it to say, I did not end up using Yeul Sachir. If you would like to try them out, go right ahead. I have heard (through the grapevine, not through anyone that I know personally) that they were able to provide the services that they promised. I was just not really impressed with their professionalism, and I didn’t have time to wait for them to get around to pursuing me as an “employee”.

What I did instead was go to the place that any other Anglo in the Jerusalem area should go when in need of information about anything: Janglo. I sent an email inquiry for information regarding accountants and lawyers with experience in this area. Got back at least ten replies within 24 hours. One of the replies was from an accountant who is located in the center of Jerusalem. He has a private company (owned by an associate of his) that specializes in providing these services. He does not advertise it so much, just uses it for his clients when they need it. I went into his office, talked it over with him and signed up. It is more expensive than Yeul Sachir (although for me, that was not an option anyway), but it has the advantage of being run by my accountant (who still treats me like his client, looking out for my best interests). I am also able to get a pretty good pension savings and life/disability insurance plans through the owner of the company. If anyone is interested in the name of my accountant, please email me at yaakov @ this domain. So far the arrangement has been working out pretty well.

Final Thoughts

This whole thing is something that I put off for a while both pre and post-aliyah. In retrospect, I should have gotten my act together regarding my employment and tax situation much sooner (ie: as soon as I stepped “off the boat”). That said, I am pretty confident that I have put myself in a good position in to (legally) take advantage of the tax laws in both the US and in Israel so as to minimize my tax liability in both countries as much as possible, while gaining the benefits of being an employee of an Israeli company.

If your scenario is or may be similar to mine, I think that it behooves you to investigate the best options for yourself, as soon as you can. (Disclaimer: Everything that I wrote above I learned from reading websites, talking with various professionals, my accountant, as well as attending a very helpful tax-planning seminar at the NBN offices. That said, this is not intended as professional advice. I have not looked any of this up “in the sources” and I am neither an expert in US nor in Israeli income tax laws. If you have any questions feel free to ask, but I will most likely direct you to a professional for advice. I encourage you to talk to an accountant familiar with both Israeli and US tax laws if you find yourself in a situation resembling mine. If you would like the names of people in Israel to talk to, send an email to yaakov @ this domain.)

Update on my situation: Receiving a US-based Salary in Israel, Part II: Salaried Employee

Scenario: We are eating the Shabbat day meal. There is a 2 year old girl, Rachel, who is walking around and causing trouble. She is a sweet little girl, not talking much yet, but very intelligent. She understands exactly what her parents tell her. She walks up to the table, picks up a piece of bread, crumbles it in her hands, throws it on the floor and then looks up at her mother to see what kind of reaction she will get for her efforts.

“Rachel, I did not permit you to do this (??? ?? ????)” the mother says in hebrew. Her tone is serious but not angry. “Now that you threw the bread on the floor, please pick up each piece and bring it back to Imma”. Rachel saw that her mother had caught her red-handed and that she would have to clean up her mess. She went over, picked up one piece and brought it back to her mother. “Thank you very much Rachel for bringing me this piece” the mother said with a smile. “No please go back and bring me the other pieces”. With a big grin, Rachel went off to pick up the rest of the pieces, bringing them back to her mother one at a time, and receiving a smile and thankyou for each piece.

Lessons learned:

• If a child does something to test you (or something for their own amusement that they really should not have done) and you need to discipline them, screaming, yelling and threatening can be counter-productive. Instead, a firm tone and serious face is all that is needed to convey to the child that what they have done is not acceptable.
• Punishments do not need to consist of sending someone to their room or taking away privileges. Wherever possible, tie the punishment in to the act that was done. That way the child has it doubly-reinforced that what they did was not right.
• When everything is better again, give a smile, a hug.

So we have found a solution. It works well, and keeps him warmer. I’m sure you all figured it out…our little boy is wearing tights!! I don’t know if this is a “trick of the trade” that everyone smart does, but we just figured this one out (with the help of some of our Israeli friends). We hope we won’t be casuing some sort of identity crisis years from now…and FYI, if you’re looking for a pair, they are called “garbiyonim.”

Personally, my hebrew is good enough to get me around, order shawarma, and speak with most Israelis (except for the ones that talk really really fast). We are in the middle of the process of renting an apartment from overseas and if I didn’t know how to speak Hebrew well (thanks to Solomon Schechter Day School, Akiba Hebrew Academy and my years in Israel post-High School) I don’t know how I would have been able to do this (if it doesn’t fall through, that is).

I was advised by someone to take ulpan for at least a few weeks after making aliyah, before starting to work. I don’t know if I will do this though – I will be working for my current company in the US after making aliyah, and they will want me to start as soon as I can (more on that in another post). Hopefully I will be able to make do with what I know, try to learn more (especially lots of the technical terms and cultural expressions that they don’t teach you in elementary school) and not be too self-conscious about the mistakes that I will be making.

Hi all from sunny Israel,

I just wanted to share one thing for all those people yet to come. Someone, on one of these boards (thank you SO much, by the way), told us something that has made SUCH a difference. They told us to always consider your first attempt at an office as a pilot trip. You go in, look around, meet some people, get some info and if you get something done great but don’t expect to because you wont be in the right place or have the right paperwork. I have found that it has GREATLY reduced our stress levels and surprisingly enough, the more relaxed we are, the more we get done. Absolutely the biggest thing we learned is that if we don’t get it done today, it’ll happen tomorrow, or the next.

Another thing someone told us was in the end, it’ll all be good. And if it’s not good, it’s not the end. There is always someone else to talk to who can give you a different answer. Just stay calm and only throw a fit when it is absolutely necessary (as it sometimes is).

Come home soon

I’d like to know what hit you the ‘wrong’ way (about Neve Daniel). We are also looking for a community we would like to live in. We have already visited kochav yakov and I’d like to know what you think of it since you have been there too. Have you been anywhere else and what were your impressions?

Here are the things that hit us the wrong way about Neve Daniel (note: we were there for just one Shabbat – these observations are based on our experiences then and on conversations that we had. I am just listing here the things that hit us the “wrong way”. Everything else was good. Overall it is a very nice community, one where we still see as a potential place to move to, some day):

1. While we walked down the street and at shul, no one to whom we had not previously been introduced went out of their way to greet us or to introduce themselves. This was confirmed to us by our hosts as being the norm rather than the exception. It seems like Neve Daniel is more of a private community, where people don’t try to involve themselves with others uninvited. Some people might view this as being ideal. We prefer more what we experienced in Kochav Yaakov – nearly every person who we saw on the street greeted us, after shul, we were approached by half a dozen different people who introduced themselves. Seemed to be just a more outgoing, friendlier, diverse and welcoming community.
2. The English-speaking presence in Neve Daniel is much more obvious. Approximately 30% English speakers. We met a some American olim who did not speak any English at all (though their kids do) – and because of the Anglo presence in Neve Daniel they are able to get by doing this. Compare this to Kochav Yaakov – English speakers are about 10%, their is definitely a very nice group of English speaking olim, good social network. But the English presence is not as obvious. My wife and I are able to speak Hebew (though there is always room for improvement) and we are looking for a community where there is a solid group of American olim with whom we can be friends, yet the overall feel of the community is more Israeli. Kochav Yaakov felt much more this way than did Neve Daniel. (Though I am sure there are many people for whom this would make Neve Daniel a more desirable place to live)
3. Neve Daniel is built on a hill. The shul (under construction for the past few years) is at the top of the hill. Everyone lives on the slopes. (Very beautiful views. See here for photos). The new houses are being built on a very picturesque, but very windy side of the hill. Entrance fee to the yishuv is $20-$25K. In Kochav Yaakov, new houses in a new neighborhood are being built across the street from the older neighborhood, right in the middle of things, near the entrance to the yishuv. Entrace fee to the yishuv is $2500.
4. To be fair, Neve Daniel does may a slightly better location than Kochav Yaakov. Both are about the same distance from Yerushalayim (10-15 minutes). Neve Daniel is to the south, which places it in closer proximity to the new train station which will God-willing be featuring high-speed trains to the Tel Aviv area. It is also in close proximity to the other communities in Gush Etzion (like Efrat and Alon Shevut) with all that they have to offer. Kochav Yaakov is to the north, placing it closer to the Har Hotzvim hi-tech industrial park. However, current political projections are that Neve Daniel (and the rest of the Gush Etzion area) are to be included within the security fence. Kochav Yaakov will not. Though as we all know, that can change tomorrow (and for some people, may make Kochav Yaakov more attractive).

With everything else being equal (as it basically is) we like Kochav Yaakov better. But don’t take our word for it. Go see for yourself.

If your friend (or relative) is fast approaching their due-date, and could go into labor at any second (b’shaa tovah, of course) do not call them with the sole purpose of asking them if they have gone into labor yet or if they have had their baby yet. Do not even call and talk with them about something else, and then ask them if they have gone into labor yet or had their baby yet. Just don’t ask. And if you can’t talk to said friend (or said friend’s husband) without having the topic linger in the background during the conversation, then don’t call.

Here is why: when the baby does come, b’shaa tovah, you will find out. Either by phone, email, word of mouth, OnlySimchas…don’t worry, you will find out. However, before the baby comes, your friend is going to be inundated with lots of people calling and emailing for the sole purpose of finding out if she has gone into labor yet. It is annoying. And when your friend has not yet gone into labor, if all she hears is “have you gone into labor yet?” then it will constantly keep her thinking about things like “when will I go into labor” or “I hope I go into labor soon” or “why can’t I think about anything other than when will I go to labor?”. There are better things to be thingking about. Trust me.

Thank you for listening to this public service announcement. We know bring you back to your regularly scheduled programming.

Kids will definately learn to speak Hebrew fluently. It will be their mother tongue. If you do not speak English at home, your kids will not know English beyond the meager level that they learn in school. If you do not make them talk in English, they will never learn how to speak it (just how to listen to it).

What is wrong with this? Well, unless your parents understand and speak fluent Hebrew, your children will never really be able to communicate well with their grandparents. And as immigrant parents (yikes), the same thing can end up happening to you (unless you go to ulpan like a good American oleh). Additionally, in today’s world, fluency in English is one of the most useful ways you can prepare your children to do business in a world where English is the dominant language.

I heard from one person (who made aliyah a couple of decades ago): “the biggest mistake that I ever made was to not make my kids speak English at home)”. I had not thought about this issue so much until three or four people mantioned it to me over the course of one Shabbat. Something to think about…