Why did this change?

Microsoft rolled out this update to strengthen security around shared files. Because it’s a new process, it can look unfamiliar the first time you go through it — but rest assured, your files haven’t moved and nothing on our end is broken. This guide will walk you through each step.

Step-by-Step Instructions

Step 1: Click the link

When you click the shared link from our email, you’ll be taken to a Microsoft sign-in screen. Don’t worry — this is not asking you to have or create a Microsoft account. It’s simply asking for the email address we have on file for you. Enter your email address here.

Step 2: Choose how to verify your identity

Microsoft will ask how you’d like to verify it’s really you. In our experince, the email address options is the simpliest one.

Step 3: Check your email for a code

Microsoft will send a one-time verification code to your email address.

Step 4: Copy the code

Open the email from Microsoft and copy the verification code provided.

Step 5: Enter the code

Go back to the Microsoft sign-in window and enter the code you copied.

Step 6: Choose whether to stay signed in

Microsoft may ask if you’d like to stay signed in on this device. This is entirely your choice and won’t affect your ability to access your files either way.

Step 7: You’re in!

You should now have access to your shared files.

The post How to Access Your Files appeared first on Cole & Waxman Tax Services.

Before getting into the details, a quick disclaimer: Cole & Waxman is a U.S. accounting firm. We are not Israeli accountants, and this article is not Israeli tax advice. Anyone making aliyah, changing residency, or restructuring income should speak with qualified Israeli tax and legal professionals. That said, many of our clients are U.S. citizens living in Israel or planning aliyah, and these new rules are important enough that we wanted to share our understanding of the key points.

The short version: for some U.S. olim, 2026 may be a very favorable year to make aliyah from a tax perspective. The new rules may reduce Israeli income tax, reduce double social security-type taxes, and make remote work for a U.S. employer somewhat easier to discuss.

1. The 10-Year Israeli Exemption Still Exists

Historically, one of the major Israeli tax benefits for new olim has been the 10-year exemption from Israeli tax on foreign-source income.

That basic benefit still exists.

For example, a new oleh may still be exempt from Israeli tax on many types of foreign-source income during the 10-year period, such as U.S. investment income, foreign rental income, foreign pension income, or foreign capital gains, depending on the facts.

However, there is an important change starting in 2026: olim who become Israeli tax residents from January 1, 2026 may still receive the 10-year Israeli tax exemption, but they may now have Israeli reporting obligations on worldwide income and assets.

In other words, the income may still be exempt from Israeli tax, but it may no longer be invisible to the Israeli reporting system.

That is a big practical change. Americans are already used to worldwide reporting because the U.S. taxes citizens on worldwide income. Now, new olim should expect more coordination between their U.S. and Israeli tax filings.

2. New Israeli Exemption for Active Income

This is the headline change.

Olim who become Israeli tax residents during the window from November 5, 2025 through December 31, 2026 may be eligible for a new Israeli tax exemption on active income[RS1]  through 2030.

The annual caps are expected to be:

This can apply to qualifying active income, such as salary, business income, or professional income. It is not meant to cover passive income like dividends, interest, rent, or capital gains.

A few important cautions:

First, this is not automatic. The person needs to qualify, the aliyah/residency timing needs to fit, and the income needs to be the right type of income.

Second, work performed physically in Israel may be treated as Israeli-source income even if paid by a U.S. employer. That can actually be helpful under this new rule, but it also means the sourcing analysis matters.

Third, related-party situations need special review. For example, if the oleh is being paid by a family company or related business, the regular caps may not apply in the same way.

Still, for the right person, this could be a very meaningful benefit. A U.S. citizen making aliyah in 2026 who continues earning active income may be able to reduce Israeli income tax dramatically during the first few years.

3. U.S. Social Security and Bituach Leumi

This is another major development for Americans.

Because the U.S. and Israel do not have a totalization[RS2]  agreement, Americans in Israel have often faced an ugly result: U.S. Social Security/self-employment tax on one side, and Israeli Bituach Leumi on the other.

The new rule appears to help certain U.S. olim who are paying U.S. Social Security tax on active income.

Beginning in 2026, qualifying U.S. olim may be exempt from Israeli Bituach Leumi on that same income for the first five years after aliyah.

But there are two critical points:

First, this does not eliminate mas briut.
The exemption is for Bituach Leumi/National Insurance, not Israeli health tax.

Second, it only helps where U.S. Social Security tax is actually being paid.
For example, if a new oleh continues working for a U.S. employer and remains subject to U.S. FICA, or is self-employed and paying U.S. self-employment tax, this rule may be very helpful. But each case needs to be checked carefully.

This change could save real money, especially for self-employed Americans who otherwise may have faced social security-type taxes in both countries.

4. Remote Work for a U.S. Employer

Many Americans making aliyah want to continue working for a U.S. employer. One of the big concerns has always been whether that creates Israeli tax exposure for the U.S. company.

In tax language, this is often discussed as a “permanent establishment” issue. The fear is that the employee’s work from Israel could create a taxable presence for the foreign employer in Israel.

The new rules appear to provide some relief for foreign employers connected to the work of a qualifying oleh in Israel.

That is good news, but it should not be overstated. This does not mean a U.S. company can ignore Israeli payroll, withholding, employment law, benefits, VAT, or corporate tax questions. It also does not mean every remote-work setup is automatically safe.

What it does mean is that the conversation with a U.S. employer may become easier. Instead of a flat “you cannot work from Israel,” there may now be a better basis to explore a compliant structure.

5. The U.S. Tax Side Still Matters

None of these Israeli benefits eliminate U.S. tax filing obligations.

A U.S. citizen who makes aliyah still needs to file U.S. tax returns and may still need to deal with FBAR, Form 8938, foreign tax credits, foreign earned income exclusion, self-employment tax, PFIC issues, Israeli pensions, and other cross-border reporting.

The most important point is this:

Tax-free in Israel does not mean tax-free in the United States.

In fact, if Israeli income tax is reduced because of the new Israeli exemption, the U.S. foreign tax credit may also be reduced. That can increase the importance of careful U.S. planning.

For example, a new oleh may have Israeli salary exempt from Israeli income tax under the new rule. But that salary may still be taxable on the U.S. return. If there is little or no Israeli tax paid, there may be less foreign tax credit available to offset U.S. tax.

This is exactly where U.S.-Israel coordination becomes important.

Practical Takeaways

For Americans considering aliyah in 2026, these changes are worth reviewing before the move, not after.

The key questions are:

1. When will you become an Israeli tax resident?
2. Is your income active income or passive income?
3. Is the income earned from work physically performed in Israel?
4. Are you being paid by a related party?
5. Are you paying U.S. Social Security or self-employment tax?
6. Will your U.S. employer allow remote work from Israel, and under what structure?
7. How will the Israeli exemption affect your U.S. tax return?

Bottom Line

The new 2026 Israeli tax rules may create a significant opportunity for U.S. citizens making aliyah, especially those who continue earning active income after moving to Israel.

The combination of the 10-year foreign-income exemption, the new active-income exemption, possible Bituach Leumi relief for those paying U.S. Social Security tax, and some permanent-establishment relief for foreign employers could make aliyah financially easier for certain Americans.

But the details matter. These benefits are not automatic, and they do not replace U.S. tax planning. Anyone considering aliyah should review the facts with both Israeli and U.S. tax professionals before making decisions.

Acknowledgment

Special thanks to Rachayl Simon, CPA (Israel) for her review, comments, and valuable input regarding the Israeli tax aspects discussed in this article. Any errors, omissions, or misunderstandings remain solely the responsibility of the author.

Israeli Tax Consultation

Readers seeking advice regarding Israeli tax residency, aliyah planning, Israeli reporting obligations, or the application of the new Israeli tax rules to their specific circumstances may contact:

Rachayl Simon, CPA (Israel)
📞 +972 2-632-0773
✉️ office@simonrcpa.com

Professional advice should always be obtained before making tax, legal, or financial decisions.

Disclaimer: Educational use only. This article is not tax advice, legal advice, or professional advice of any kind. The content may contain errors or omissions and may not reflect current law. Consult qualified tax and legal professionals before taking any action based on this information.

The post New 2026 Israeli Tax Rules for U.S. Olim: What Americans Should Know appeared first on Cole & Waxman Tax Services.

Families coping with the trauma of a terror attack or a war injury have already endured more than enough loss and stress. They should not face the burden of unnecessary tax complications on top of their recovery.

TL;DR Practical Takeaways

In many cases, U.S. citizens in Israel do not need to pay U.S. income tax on disability compensation received because of injuries from a terrorist attack, rocket attack, military action, or other qualifying hostile action.

This exclusion is not based on the U.S.-Israel tax treaty. It comes directly from the Internal Revenue Code.

The key rule is found in IRC §104(a)(5). Disability income can be excluded from gross income if it is attributable to injuries incurred as a direct result of a terroristic or military action.

The definition of “terroristic or military action” is found in IRC §692(c)(2). That definition includes certain terrorist activity directed against the United States or any ally of the United States.

For U.S.-Israeli dual citizens, that ally language matters. Israel is an ally of the United States, so Israeli disability payments connected to qualifying terror-related or hostile-action injuries may fall within the U.S. tax exclusion.

The most important practical point: keep documentation. If the payment came from Bituach Leumi, Misrad HaBitachon, or another Israeli agency, you probably will not receive a U.S. Form W-2 or 1099. That does not mean the payment is taxable, but it does mean you need records showing why the payment was made.

Stop here if you just need the practical answer. Keep reading if you want the legal background and a deeper explanation.

The Common Mistake

Many U.S. citizens living in Israel assume that anything received from an Israeli government agency must be reported as taxable income on a U.S. tax return.

That is not always correct.

U.S. citizens are generally taxed on worldwide income. But U.S. tax law also contains specific exclusions. One of those exclusions applies to certain disability payments connected to terrorism or military action.

The right question is not “Did I receive a U.S. tax form?” The right question is “Why was this payment made?”

Example: A U.S.-Israeli dual citizen is injured in a terrorist attack and later receives monthly disability compensation from Bituach Leumi. The taxpayer does not receive a Form 1099. The U.S. tax analysis should focus on whether the payment is disability income tied directly to injuries from a qualifying terroristic or military action.

The Legal Rule

IRC §104 generally deals with compensation for injuries or sickness.

One part of that section, IRC §104(a)(5), excludes from gross income certain disability income attributable to injuries incurred as a direct result of a terroristic or military action.

IRC §692(c)(2) defines “terroristic or military action.” The definition includes certain terrorist activity directed against the United States or any of its allies.

For Americans in Israel, the phrase “or any of its allies” is the bridge between Israeli compensation payments and the U.S. tax exclusion.

Example: A U.S. citizen in Israel receives compensation from Misrad HaBitachon because of injuries sustained in a recognized hostile action. If the payment is truly disability compensation connected directly to that injury, there may be a strong basis to exclude it from U.S. taxable income under IRC §104(a)(5).

This is separate from the U.S.-Israel tax treaty. The exclusion comes from U.S. domestic tax law.

What Types of Payments May Qualify?

The strongest case is for payments that are clearly disability compensation for physical injury or sickness caused by a terrorist attack, rocket attack, military action, or other qualifying hostile action.

The payer may be Israeli rather than American. The payment may come from Bituach Leumi, Misrad HaBitachon, or another Israeli program. The payment may be monthly or lump-sum.

The label on the payment matters less than the legal reason for the payment.

Example: A taxpayer receives an Israeli disability award after being injured in a rocket attack. The award letter states that the payment is based on the injury and the taxpayer’s recognized disability status. That documentation is very different from a general welfare payment, unemployment benefit, or ordinary pension.

Not every payment qualifies. Regular pensions, lost wages, unemployment benefits, general support payments, and unrelated disability benefits may require different treatment.

Documentation Is the Key

Israeli agencies usually do not issue U.S. tax forms. That means the taxpayer needs to build a file.

The file should include the Israeli award letter, the agency decision, medical or disability determination, proof of the event that caused the injury, and annual payment totals. If the documents are in Hebrew, keep an English translation or summary.

A taxpayer claiming the exclusion should be able to show what happened, what injury resulted, who paid the award, and why the payment was made.

Example: A taxpayer receives ₪80,000 during the year from an Israeli agency. The tax file should not simply say “Bituach Leumi payment.” It should identify whether the amount was disability compensation, income replacement, pension, reimbursement, or another type of payment.

For practical U.S. tax filing, the preparer should keep a short workpaper explaining the exclusion and citing the relevant law. That workpaper should connect the facts to IRC §104(a)(5) and IRC §692(c)(2).

Practical Bottom Line

For U.S. citizens in Israel, terror-related disability compensation should not automatically be treated as taxable income.

There is a specific U.S. tax exclusion that may apply when the payment is disability income tied directly to injuries from a qualifying terroristic or military action. The law expressly includes actions directed against U.S. allies, which is especially relevant for Israel.

The best result comes from matching the payment to the law and keeping clear documentation before the IRS ever asks.

Three Action Steps

1. Identify the type of payment. Separate disability compensation from pensions, unemployment, lost wages, reimbursements, and general support payments.
2. Save the documents. Keep the Israeli agency approval, medical/disability determination, hostile-action recognition, payment summaries, and translations.
3. Review before filing. Do not assume the payment is taxable, and do not assume it is excluded. Have the facts reviewed under IRC §104(a)(5), IRC §692(c)(2), and the relevant IRS guidance.

Sources

IRS Publication 525, Taxable and Nontaxable Income:
https://www.irs.gov/publications/p525#en_US_2022_publink1000229319

Internal Revenue Code §104:
https://www.law.cornell.edu/uscode/text/26/104

Internal Revenue Code §692(c)(2):
https://www.law.cornell.edu/uscode/text/26/692#c_2

IRS Publication 3920, Tax Relief for Victims of Terrorist Attacks:
https://www.irs.gov/publications/p3920

MyArmyBenefits, Federal Taxes on Veterans’ Disability or Military Retirement Pensions:
https://myarmybenefits.us.army.mil/Benefit-Library/Federal-Benefits/Federal-Taxes-on-Veterans-Disability-or-Military-Retirement-Pensions

Disclaimer: This article is for educational purposes only. It is not tax advice or legal advice. Taxpayers should consult a qualified tax and/or legal professional regarding their specific facts, documentation, and filing position.

The post War and Terror-Related Injury and Disability Payments: U.S. Tax Treatment for Americans in Israel appeared first on Cole & Waxman Tax Services.

For many Americans living overseas, especially those dealing with endless U.S. tax reporting, FATCA headaches, and foreign banking friction, that reduction will feel dramatic. But cheaper does not mean simple, and it definitely does not mean risk-free. Renouncing U.S. citizenship remains one of the most serious legal and tax decisions a person can make.

Does the New $450 Fee Apply to Me?

The practical takeaway is that the lower fee applies to renunciation services provided on or after April 13, 2026. Since renunciation must be completed in person at a U.S. embassy or consulate abroad, the key date is generally the date of the appointment at which the renunciation is actually carried out, not when you first emailed the embassy or started gathering documents. The final rule itself is effective April 13, 2026, and the process requires an in-person appearance before a consular or diplomatic officer.

What Exactly Is the $450 Paying For?

The fee covers the administrative processing of a request for a Certificate of Loss of Nationality, usually called a CLN. That certificate is the formal State Department document confirming that the loss of nationality has been approved. The Federal Register rule specifically describes the fee as the fee for administrative processing of a request for a CLN.

Is There a Minimum Age?

This is where many people get tripped up. There is no simple rule that a parent can just sign for a child and renounce the child’s citizenship. In fact, State Department guidance says the opposite: parents may not take the oath of renunciation or otherwise seek to relinquish the U.S. citizenship of their minor children. State Department also says that minors who seek to renounce must show that they are acting voluntarily and fully understand the consequences, that children under 16 are presumed not to have the required maturity, and that minors under 18 receive extra scrutiny.

So, for children, the question is not “is the fee cheaper now?” but rather “is renunciation even realistically available here?” In many cases, the practical answer is that families should proceed very cautiously and get individualized legal advice before even considering it.

What If I Already Paid $2,350?

The final rule does not create an automatic refund for people who already paid the higher fee. So if you paid $2,350 before the effective date, the conservative answer is: do not assume you are getting money back.

That said, there is an organization called the Association of Accidental Americans that has been involved in litigation challenging the old fee and seeking relief. News reports and the organization’s own materials indicate that refund-related litigation is still pending. That may be worth watching, but at this stage it is best viewed as a long shot rather than money in the bank.

Does the Lower Fee Change the Exit Tax?

No. The fee reduction does not change the expatriation tax rules. The CLN fee is a State Department consular fee. The exit tax is a separate tax concept under the Internal Revenue Code, and Form 8854 is still the key IRS filing for expatriates. IRS guidance says Form 8854 is used to certify compliance with U.S. tax obligations for the five years before expatriation and to satisfy expatriation reporting requirements.

So if you are asking, “Now that the fee is cheaper, can I ignore the tax side?” the answer is no. The cheaper fee may lower the cost of getting to the door, but it does not change what is waiting on the other side. For more on that issue, see your existing article on expatriation and exit tax.

What Might I Gain by Renouncing?

For some Americans abroad, the biggest benefit is not a one-time tax result but an ongoing reduction in administrative burden. U.S. citizens living overseas often remain stuck with annual U.S. tax and information reporting, even when they live permanently in another country and even when much of their financial life is local, not American. This can include Form 1040 filing, FBAR reporting, and complex international forms tied to foreign companies, foreign funds, and other cross-border assets. The Federal Register itself acknowledged anecdotal evidence of tax-related difficulties experienced by U.S. nationals abroad, including difficulties related in part to FATCA.

Renunciation may also make life easier with foreign banks and investment platforms. Many non-U.S. financial institutions are wary of U.S. citizens because of FATCA and related compliance burdens. That does not mean every problem disappears after renunciation, but it may make it easier to open or maintain non-U.S. banking relationships and to answer “no” to citizenship questions on financial onboarding forms truthfully. The State Department specifically noted public comments describing tax-related difficulties faced by U.S. nationals abroad.

In practical terms, people considering renunciation are often trying to escape not just one tax bill, but a lifetime of compliance exposure: self-employment tax, PFIC reporting and tax, NIIT, Form 5471 issues, GILTI issues, and capital gains mismatches between U.S. and local law. Whether renunciation solves more problems than it creates depends heavily on your facts.

What Might I Lose by Renouncing?

The most obvious loss is that you are no longer a U.S. citizen. That means no guaranteed right to enter the United States as a citizen and no unrestricted right to live and work there as a citizen. Former U.S. citizens traveling on another passport may need to rely on a visa or, if eligible, ESTA under the Visa Waiver Program. The official ESTA site currently shows an application fee of $40.27. ESTA is not a work authorization and is used for short visits under the Visa Waiver Program.

That loss matters more for some families than others. If you may want to relocate to the U.S. later, accept employment there, start a business there, or keep maximum flexibility for your children, renunciation may close doors that are expensive or impossible to reopen. Even for travel, former citizens should expect added questions in some cases, and future U.S. entry will no longer be on the same terms as before.

There can also be serious investment and estate-planning downsides. After renunciation, U.S.-source investments, U.S. real estate, withholding tax, and U.S. estate tax exposure may need to be analyzed differently. For some people, especially those with U.S. assets or expected U.S. inheritances, that downside can outweigh the compliance relief.

Is This a Good Deal for You?

The fee is clearly a better deal than it was a month ago. Going from $2,350 to $450 is a major reduction, and for some people it removes a real financial barrier. But the more important question is whether renunciation itself is a good deal for you. That answer depends on your age, your family’s future, your immigration plans, your net worth, your U.S. tax exposure, your compliance history, your banking situation abroad, and whether you are likely to regret losing U.S. citizenship later.

For adults who are permanently settled abroad, fully understand the tax consequences, do not plan to work in the United States, and are comfortable giving up U.S. citizenship, the lower fee may make renunciation more attractive than before. For children, the analysis is much more delicate, and in many cases the legal and practical obstacles are substantial.

Final Thoughts

The new $450 fee is real, and for many expats it is welcome news. But this is not a clearance sale on paperwork. Renunciation is still a permanent, high-stakes step with tax, immigration, financial, and family consequences. The price of the consular process is down. The importance of the decision is not.

Important disclaimer: This article is for educational purposes only. It is simplified, may omit important exceptions, and may contain errors. It is not tax advice, legal advice, financial advice, or immigration advice. Before acting, consult qualified professionals who can evaluate your specific facts, including the expatriation rules, Form 8854, exit tax, immigration consequences, estate tax exposure, and any issues affecting your children.

More Resources:

1. U.S. Embassy, Jerusalem - https://il.usembassy.gov/renouncing-u-s-citizenship/
2. Issues for children born abroad: US–Israeli Citizens — The Next Generation - Cole & Waxman Tax Services
3. The expatriation process and tax issues: Expatriating from the United States: What You Must Know Before You Cut Ties - Cole & Waxman Tax Services

The post Cost of Renouncing U.S. Citizenship Is “On Sale” — But Is It a Good Deal for You or Your Children? appeared first on Cole & Waxman Tax Services.

IRA Required Minimum Distributions (RMDs): What You Need to Know

If you own an Individual Retirement Account (IRA), you may have annual tax obligations related to Required Minimum Distributions (RMDs).

Many taxpayers assume that the bank or investment firm automatically handles these requirements. In reality, the responsibility ultimately rests with the taxpayer.

This page explains when RMDs may apply and what information we may need from you when preparing your tax return.

For more background and details, see this article: Required Minimum Distributions (RMDs) – What U.S. Expats in Israel Need to Know - Cole & Waxman Tax Services

What Is a Required Minimum Distribution?

Under U.S. tax law, IRA owners and certain IRA beneficiaries must withdraw a minimum amount each year from retirement accounts once they reach the applicable starting age, or after inheriting an IRA.

These withdrawals are called Required Minimum Distributions (RMDs).

If the required amount is not withdrawn by the applicable deadline, the IRS may impose a penalty on the shortfall.

Under current law:

• The penalty is generally 25% of the amount that should have been withdrawn, and
• It may be reduced to 10% if the error is corrected promptly.

Your Responsibility

It is the taxpayer’s responsibility to determine:

• Whether an RMD is required for the current year, and
• Whether the correct amount has been withdrawn by the deadline.

Financial institutions may provide estimates, but they do not always calculate the correct amount, particularly when multiple accounts or inherited IRAs are involved.

Traditional, SEP, and SIMPLE IRAs

Owners of Traditional, SEP, and SIMPLE IRAs generally must begin taking RMDs once they reach the required age under current law.

To determine whether an RMD is required and how much must be withdrawn, we may need the following information:

• Confirmation of whether you reached RMD age during the tax year
• The December 31 balance of each IRA from the prior year
• The total distributions taken during the current year

If you would like our assistance calculating your RMD, please provide:

• IRA statements showing December 31 year-end balances for the prior year
• Distribution confirmations for the current year
• Note - this is outside the scope of the standard tax preparation agreement. Your tax accountant will let you know what fees apply for this additional service.

Inherited IRAs

Inherited IRAs are subject to special distribution rules, and these rules vary depending on several factors, including:

• Whether the original IRA owner died before or after their Required Beginning Date
• Your relationship to the deceased
• Whether you qualify as an Eligible Designated Beneficiary

For inherited IRAs, please provide the following information:

• Date of birth of the original IRA owner
• Date of death
• Your relationship to the deceased
• December 31 account balances for each year
• Distributions taken during the year

Failure to comply with inherited IRA distribution rules may also result in penalties.

Note - this is outside the scope of the standard tax preparation agreement. Your tax accountant will let you know what fees apply for this additional service.

Roth IRAs

Roth IRA owners generally do not have lifetime RMD requirements.

However, beneficiaries of inherited Roth IRAs may still be required to take distributions.

Additional IRS Guidance

The IRS provides detailed information on Required Minimum Distributions here:

IRS Required Minimum Distribution FAQs
https://www.irs.gov/retirement-plans/retirement-plan-and-ira-required-minimum-distributions-faqs

Disclaimer

Service
Our preparation of your tax return does not automatically include monitoring or calculating your RMD obligations.

If you would like our assistance reviewing or calculating your RMD requirements, please submit the relevant IRA statements and notify our office.

Educational Disclaimer

The information on this page is provided for general educational and informational purposes only. It is not intended as tax, legal, or financial advice and should not be relied upon as a substitute for advice from a qualified professional.

Tax rules relating to retirement accounts can be complex and depend on each taxpayer’s specific circumstances. You should consult your personal tax advisor or accountant for guidance regarding your individual situation.

The post IRA Required Minimum Distributions (RMDs): What You Need to Know appeared first on Cole & Waxman Tax Services.

Over the past year, we’ve been getting the same question again and again from U.S. citizens living in Israel and other countries:
“How are we supposed to receive IRS refunds if we don’t have a U.S. bank account?”

That question just became a lot more urgent.

Under Executive Order 14247 – Modernizing Payments To and From America’s Bank Account, the U.S. government has directed federal agencies, including the Internal Revenue Service, to move away from paper checks and toward electronic payments—primarily direct deposit to U.S. bank accounts.

For taxpayers living abroad, this creates a very real, very practical problem.

What EO 14247 Means in Practice

The IRS has announced that it intends to phase out paper refund checks, starting with individual taxpayers. While paper checks have not been eliminated entirely yet, the direction is clear:

• Electronic refunds are preferred
• Paper checks are becoming slower, less reliable, and more likely to be delayed
• Overseas taxpayers without U.S. banking access are disproportionately affected

For many U.S. citizens in Israel, the traditional “just wait for the check” approach is no longer realistic.

Why This Is a Big Issue for U.S. Citizens Living Abroad

Most of our clients in Israel (and elsewhere overseas):

• Do not maintain a U.S. residential address
• Cannot appear in person at a U.S. bank branch
• Are therefore unable to open a standard U.S. bank account

As a result, even taxpayers who are fully compliant—and entitled to substantial refunds—may face months of delays or administrative complications after filing.

Importantly, this issue arises after the return is filed. Once a refund is in limbo, fixing the payment method can be slow and frustrating.

Are Non-U.S. Residents Exempt?

At this stage:

• There is no blanket exemption for U.S. citizens living outside the United States
• The IRS has not issued a clear carve-out for “foreign address” taxpayers
• Any future accommodation remains speculative

In other words: do not assume the IRS will solve this for you automatically.

Refund Options for U.S. Citizens Living in Israel

Below are the realistic options currently available, along with their pros and cons.

Option 1: File Normally and Wait for a Paper Check

How it works:
You file your return without U.S. bank details. Eventually, the IRS issues a paper refund check by mail.

What to expect:

• Refunds often arrive months later than usual
• International mail delays, lost checks, and reissuance requests are common
• This option is becoming increasingly unreliable

Bottom line:
Still possible—but expect delays and uncertainty.

Option 2: Open a Traditional U.S. Bank Account

Why it’s difficult:

• Most U.S. banks require in-person branch visits
• Proof of U.S. address is usually mandatory
• Not practical for most long-term overseas residents

Bottom line:
Feasible for a small minority. Not a general solution.

Option 3: Use a FinTech Platform (e.g., Wise)

For many U.S. citizens living abroad, this is currently the most practical workaround.

Platforms like Wise can provide:

• U.S. routing and account numbers
• Compatibility with IRS direct deposit
• Access for residents of Israel and many other countries

High-Level Wise Setup Overview

(Exact requirements may change and are subject to Wise approval.)

• Initial funding (e.g., ~85 ILS by bank transfer; funds remain usable)
• Account holder name must match the bank account
• Personal details (name, gender, address)
• Compliance questions (employment, AML)
• SSN
• Proof of address (utility bill / bank statement / tax notice)
• Tax residency (typically U.S. + Israel)
• Identity documents (Israeli passport / ID / driver’s license)
• Short video verification via phone or laptop
• Verification period of several days

Important notes:

• Wise is a financial technology platform, not a bank
• Funds are not FDIC-insured
• Approval is not guaranteed and depends on Wise’s internal compliance review
• Visit WISE.com for more infomation
• Disclaimer: We have no relationship with Wise and cannot be responsible for any risks, limitations, or outcomes associated with using their platform; it is presented solely as one possible solution for receiving IRS refunds.

Why This Matters for Taxpayers (and Advisors)

Handled proactively, this change can actually improve the taxpayer experience:

• Faster receipt of refunds
• Lower international transfer costs
• Fewer follow-ups with the IRS
• Less operational friction

Ignored, it can lead to:

• Refunds stuck in limbo
• Client frustration
• Increased administrative workload
• Erosion of trust in the filing process

Are There Other Alternatives Besides Wise?

Yes—depending on the taxpayer’s profile and availability:

• Traditional U.S. banks (e.g., Bank of America, Chase, Wells Fargo)
• Other platforms offering U.S. account details (e.g., Revolut, Payoneer, Mercury). Most of these are problematic without a US address. Let us know if you have any success!
• Hybrid or institution-specific solutions
• The State Department Federal Credit Union offers accounts, but they require a US mobile phone number, and a US address with 3rd party verification. See: https://www.sdfcu.org/

Each option comes with different eligibility rules, costs, and risks.

One Important Clarification

This issue primarily affects individual taxpayers.
In many cases, the IRS is expected to continue issuing paper checks to foreign companies, though this too may evolve.

Bottom Line

Executive Order 14247 doesn’t change who gets a refund—but it is changing how refunds are paid.

For U.S. citizens living in Israel and overseas, planning ahead is no longer optional. Deciding before filing how a refund will be received can prevent months of unnecessary delays and stress.

Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal, tax, financial, or regulatory advice. While efforts have been made to ensure accuracy, IRS policies, procedures, and interpretations—including those related to Executive Order 14247—are subject to change, delay, exception, or modification without notice.

Opening or using any financial account or service (including Wise or any other third-party provider) is subject to the provider’s terms, KYC/AML procedures, eligibility requirements, and regulatory constraints. We do not control, manage, or guarantee the approval, functionality, timing, or outcome of any third-party service.

FinTech platforms are not traditional banks, and accounts may not be insured by the FDIC. Taxpayers are solely responsible for evaluating whether a particular solution is appropriate for their circumstances and for understanding any tax, regulatory, or banking implications in both the United States and their country of residence.

Additional Disclaimer – No Endorsement / Independent Decision-Making

For the avoidance of doubt, we do not endorse, recommend, or guarantee any specific bank, financial institution, or service provider, including any U.S. bank or financial technology platform referenced in this article. Any examples mentioned are provided solely for informational purposes based on current market availability and general experience, and should not be interpreted as a recommendation or preferred solution.

Each taxpayer’s circumstances are unique. Taxpayers are solely responsible for conducting their own due diligence, evaluating available options, understanding applicable terms and conditions, and assessing the legal, regulatory, tax, and financial risks associated with opening or using any account or service.

All decisions relating to the selection and use of banking or financial services—and all resulting risks, costs, delays, limitations, or consequences—remain entirely the responsibility of the taxpayer. We disclaim any responsibility or liability for outcomes arising from a taxpayer’s choice to engage with any third-party provider.

The post Executive Order 14247: What U.S. Citizens in Israel and Overseas Need to Know About IRS Refunds appeared first on Cole & Waxman Tax Services.

Should You Add Family Funds to Your Dual-Citizen Child’s Trump Account?

Short answer: usually not.

For U.S.–Israeli families, the Trump Account looks attractive on the surface — tax-deferred growth, a government seed deposit, and a retirement-style framework. But once Israeli tax law is applied correctly, the long-term benefit of adding family money is far smaller than most people expect.

Let’s walk through why.

Teisha Gimmel Does Not Apply

Many parents assume Israeli “Teisha Gimmel” (סעיף 9ג’) pension treatment will protect Trump Account distributions.

It will not.

Teisha Gimmel applies only for a new Israeli immigrant when an investment account was opened and funded while the taxpayer was living outside Israel. A Trump Account funded while the child is an Israeli resident is taxed under:

Teisha Bet (סעיף 9ב)

What Teisha Bet Means in Practice

Under Teisha Bet:

• Israel does not recognize basis for after-tax contributions.
• Only 35% of each withdrawal is tax-free.
• The remaining 65% is taxed at Israeli ordinary marginal tax rates, not capital-gains rates.

This applies even if every dollar was contributed with already-taxed money.

U.S. Tax — FTC Assumed Fully Honored

Under the U.S.–Israel tax treaty, when the child is resident in Israel at the time of withdrawal:

• Israel has the primary taxing right on pension distributions.
• The IRS must allow a foreign tax credit for Israeli tax paid.

For planning purposes, we assume the FTC fully eliminates U.S. income tax on the distribution.

The Math

Assumptions:

• $5,000 per year for 18 years → $90,000 total
• Growth at 7% annually for 50 years

$$90{,}000 \times (1.07)^{50} = 2{,}651{,}132$$90,000×(1.07)50=2,651,132

Trump Account / IRA

Taxable Brokerage Account

Assumptions:

• Dividend drag reduces growth to 6.6%
• Ending value: $2,198,380
• Capital gain: $2,108,380
• Israeli capital-gains tax @ 25%: $527,095
• U.S. NIIT @ 3.8%: $80,118

$$2{,}198{,}380 - 527{,}095 - 80{,}118 = 1{,}591{,}167$$2,198,380−527,095−80,118=1,591,167

Net taxable account value: $1,591,167

Final Comparison

Even after 50 years, the Trump Account only produces a roughly 11% advantage.

What You Give Up for That 11%

To achieve this margin, your child must accept:

• Lifetime IRA restrictions
• Required Minimum Distributions
• Penalties for early withdrawals
• No Israeli basis recognition
• Cross-border compliance complexity for life
• Exposure to future Israeli and U.S. tax-law changes

A modest change in Israeli tax rates, FTC treatment, or U.S. retirement rules can easily erase this advantage.

Bottom Line

For Israeli-resident dual U.S. citizens, funding a Trump Account with family after-tax money is usually not an optimal strategy.

The harsh Teisha Bet regime combined with U.S. retirement-account restrictions means you are taking on significant rigidity and regulatory risk for a very thin potential reward.

In many real-world cases, a simple taxable brokerage account — taxed at capital-gains rates and offering full liquidity — will deliver a nearly identical result without locking your child into lifetime IRA constraints.

Disclaimer

This article is for educational purposes only and does not constitute tax or investment advice. Every family’s situation is unique. Always consult qualified U.S. and Israeli tax professionals before making funding decisions.

The post Trump Accounts Part 2 – Should You Add Family Funds to Your Dual-Citizen Child’s Trump Account? appeared first on Cole & Waxman Tax Services.

A new U.S. savings vehicle for children — informally known as the “Trump Account” — is beginning to attract attention among American families worldwide. For U.S. citizens living in Israel, this account offers a rare opportunity to start building long-term wealth for children from birth — with government funding and tax-deferred growth.

At the same time, dual U.S.–Israeli families must navigate two tax systems, making planning more nuanced than it first appears. In this article, we’ll focus on the $1,000 benefit available for young children with Social Security numbers. In the next installment, we’ll explore the pros and cons of adding extra funds from the family’s after-tax savings (spoiler: it’s usually not a good idea!).

But let’s start with the $1,000 seed accounts. Here, there’s no downside. Even with the restrictions, this represents money the child wouldn’t otherwise have — a true opportunity to build a financial foundation at no cost to the family.

What Is a Trump Account?

A Trump Account is a federally created tax-advantaged investment account for children under age 18.

Key features:

• Opened in the child’s name
• Earnings grow tax-deferred for U.S. purposes
• Converts into a retirement-style account at adulthood
• Parents, grandparents, and relatives may contribute up to $5,000 per year per child
• Certain children qualify for a $1,000 U.S. government seed deposit

The $1,000 Government Seed Deposit — How It Works

Children may receive a one-time $1,000 federal deposit if all of the following are met:

1. Born during the eligible window (currently births from 2025–2028).
2. The child has a valid U.S. Social Security Number.
3. A parent or guardian makes the required election on a U.S. tax return.
4. A Trump Account is opened in the child’s name.

The deposit is not taxable income and grows tax-deferred inside the account.

Investment Tracks Inside Trump Accounts

Permitted investments include:

• Broad U.S. stock market index funds
• Total-market or large-cap U.S. equity ETFs

Foreign funds, alternatives, sector funds, and crypto are not permitted.

How U.S. Citizens Living in Israel Can Obtain the $1,000 Trump Account Seed Deposit

For Americans living in Israel, the opportunity is very real — but the process is not automatic and requires deliberate action. Below are the three ways to obtain the $1,000 seed money and the important brokerage issues unique to expats.

Who Is Eligible?

Your child must:

• Be a U.S. citizen
• Have a valid Social Security number
• Be born between January 1 2025 and December 31 2028
• Have a Trump Account established through one of the methods below

There are no income limits.

Option 1 (Most Common)

File Your U.S. Tax Return and Attach Form 4547

This will be the default approach for most families.

When you file your U.S. tax return, attach Form 4547 – Trump Account Election to establish the account and request the $1,000 government contribution.

• Can be filed:
  • Electronically (preferred)
  • Or with a paper return
• This method works even if you normally owe zero U.S. tax.

Once processed, Treasury deposits the $1,000 directly into the newly created Trump Account.

Option 2

File Form 4547 as a Stand-Alone Form (No Tax Return)

If you are not required to file a U.S. tax return (for example, you have no income), you may submit Form 4547 by itself.

For U.S. citizens living in Israel, mail the form to:

Internal Revenue Service
Austin, TX Service Center
(International filings — same address used for Form 1040 from Israel)

This allows you to receive the $1,000 seed deposit without filing a full tax return.

Option 3

Register Online at TrumpAccounts.gov (No Tax Return Required)

Beginning mid-2026, parents will be able to open Trump Accounts online at:

👉 www.trumpaccounts.gov

This method will:

• Not require filing a tax return
• Allow direct online account establishment

However, the system will require identity verification, likely through ID.me or a similar platform.

⚠️ Expat warning:
ID verification can be very difficult without a U.S. address, U.S. phone number, or recent U.S. credit history. Many Americans in Israel encounter obstacles completing ID.me verification.

You Will Also Need a Brokerage Custodian

Opening the Trump Account with the IRS is only the first step. To actually invest the funds, the account must be held with a brokerage custodian.

This is where many Americans abroad get stuck:

• Many U.S. brokerages require U.S. residency or a U.S. address.
• Accounts are often frozen or rejected once a foreign address is disclosed.

Two firms that are generally reported to work with U.S. citizens living in Israel are:

• Charles Schwab
• Interactive Brokers

No endorsement is given or implied — policies change frequently, and you must confirm eligibility directly with the custodian before relying on any firm.

Which Option Is Best for Americans in Israel?

Final Notes

• The $1,000 seed deposit is in addition to the Child Tax Credit.
• Parents and relatives may contribute up to $5,000 per year, but basis must be tracked carefully to avoid double taxation on withdrawal.
• Every child who is also an Israeli resident must comply with both U.S. and Israeli tax rules, and families should consult their Israeli CPA regarding potential “Teisha Gimel” treatment.

Disclaimer

This article is for educational purposes only and does not constitute tax, legal, or investment advice. Every family’s situation is different. You should consult with your U.S. and Israeli tax advisors before opening or funding any Trump Account.

The post Trump Accounts Part 1: A New Tax-Advantaged Savings Account for Children – How to Obtain the $1000 Seed Deposit appeared first on Cole & Waxman Tax Services.

Let’s walk through some core concepts regarding state tax filings, especially what to keep in mind if you’re a US citizen living abroad.

Most States tax individuals based on two main factors – residency and source of income.

1. Residency Is About Intent — Not Just Where You Sleep

States generally classify individuals as one of the following:

• Resident – taxed on all income, regardless of where it’s earned
• Nonresident – taxed only on income sourced to that state
• Part-YearResident – has two components:
  • Resident portion – taxes all income (active and passive) earned while you were a resident
  • Nonresident portion – taxes only income sourced to that state after residency ended

A taxpayer is generally considered a resident of a state if:

• The state is your Domicile – your true, fixed, permanent home. Supporting facts include driver’s license, voter registration, vehicle registration, and where your family lives. OR:
• The taxpayer meets the state’s Statutory residency rules– many states apply a “permanent home + 183 days” rule

A college student or someone owning multiple homes needs to establish for themselves where their permanent residence is for tax purposes.

2. Income Is Taxed Where It Is Sourced

Most common categories of income that can trigger state tax obligations include:

• W-2 wages Typically W2 wages are sourced to the state where the work is physically done. Remote work has become a huge audit trigger because a W2 still might source income to a specific state even when the work is physically done from home in a different state or in an entirely different country! Some states enforce ‘convenience of the employer’ rules; meaning wages may still be taxed by the employer state even if the employee is remote. If you work remotely for your own convenience rather than because the employer requires it in another state, the state may still tax the income as if you worked in their state. Some states are more difficult than others regarding telecommunication. (NY is one such state)
• K-1 partnership income – many entities operate in multiple states
• Rental real estate – rental income is always taxed first in the state where the property is located

3. Credits for Taxes Paid to Other States

When two states tax the same income, more common with resident state returns, a credit may apply — but it is not automatic. If a taxpayer is a resident of one state (such as NY) but works in NJ, NJ will tax the wages earned in NJ and then NY will take tax credit on that income. If the second state has a higher tax rate, than the tax credit paid to the first state will not be enough and the taxpayer may be charged excess tax.

4. Part-Year vs. Nonresident Returns

5. Practical Compliance Tips

Here are some practical takeaways if you earned income while being physically present in the US or have state sourced income while living exclusively abroad:

• Track days present in the US when allocating income between US and Israel. Track days present in each state if traveling for business around the US.
• Some states do not allow e-filing with a foreign address and those returns will need to be paper filed via postal service.
• If a US citizen receives a W2 while living abroad, it may be difficult to prove telecommunication as a convenience of the employer to some states (most notably NY) so it may be best to update your address with the employer to avoid states taxes being withheld to begin with.
• Many states won’t honor the federal Israel war extension given by the IRS. Even though no additional interest/penalties will be calculated for federal income tax, state interest and penalties will still apply so it’s important to pay state tax in a timely manner.

Disclaimer:
This article is for educational purposes only and does not constitute tax or legal advice. Each taxpayer’s situation is unique and should be reviewed individually with a qualified tax professional.

The post Why “I don’t live in the U.S. anymore” does not always end your state tax obligations appeared first on Cole & Waxman Tax Services.

In our earlier article, “PFICs: A Practical Guide for the Perplexed,” we explained what Passive Foreign Investment Companies are, why they catch so many Americans abroad by surprise, and why the rules are so unforgiving.

Once people finally understand just how harsh the PFIC regime can be, a very reasonable follow-up question almost always comes next:

“If everything is a PFIC, what can I actually invest in?”

For many U.S. taxpayers living overseas, learning about PFICs creates paralysis. Suddenly it feels like every non-U.S. investment is a tax trap waiting to happen. The result? People stop investing — not because they don’t want to, but because they’re afraid of getting it wrong.

Here’s the good news: not everything is a PFIC. There are practical, compliant ways to invest without triggering PFIC headaches.

Let’s walk through the most common PFIC-free options.

A Quick Refresher: Why PFICs Are Such a Big Deal

PFICs generally include non-U.S. mutual funds, ETFs, and other pooled investment products. These are extremely common outside the United States, which is why so many Americans abroad end up owning them without realizing it.

The problem? PFICs are subject to some of the most punitive rules in the U.S. tax code:

• Potentially confiscatory tax treatment
• Ongoing, complex annual reporting — most notably Form 8621

For most investors, the most practical strategy isn’t trying to “optimize” PFICs — it’s simply avoiding them altogether.

So… What Can You Invest In?

1. U.S.-Domiciled Investments — The Gold Standard

The simplest way to avoid PFIC problems is to stick with U.S.-domiciled investments, even if you live abroad:

• U.S.-domiciled ETFs
• U.S. mutual funds
• Individual U.S. stocks and bonds

Because these are U.S. entities, PFIC rules do not apply at all.

Many expats invest through firms such as Charles Schwab, Morgan Stanley, Fidelity, or similar platforms.

The catch: Access.
Many non-U.S. banks and brokers restrict U.S. products due to local regulations — so where you invest can be just as important as what you invest in.

Robo-advisors such as Wealthfront and Betterment can also be an option, but they often:

• Require U.S. residency
• Require a U.S. mailing address
• Exclude most overseas investors

For Israel-based clients, using U.S. accounts usually also requires filing an Israeli tax return — which doesn’t necessarily increase total tax, but does add compliance work.

2. Interactive Brokers — Know Which One You’re Using

This is where many investors get tripped up. There are two completely different “Interactive Brokers” options.

Option A: Interactive Brokers (IBKR) — U.S. Brokerage

https://www.interactivebrokers.com

This is what most expats mean when they say they use Interactive Brokers.

IBKR:

• Provides access to U.S.-domiciled ETFs and securities
• Allows portfolios that are clearly PFIC-free
• Operates in dozens of countries
• Does not require a U.S. residential address
• Is well-understood by cross-border tax professionals

For many Americans abroad, IBKR becomes the foundation of their long-term investment strategy.

Option B: Interactive Brokers Israel (IBI) — Israeli Brokerage

This is not just a local branch of IBKR. It is a separate Israeli brokerage firm.

With IBI:

• The account is Israeli-domiciled
• Israeli reporting and withholding applies
• Many locally offered funds may be PFICs

You can invest in PFIC-free assets through an Israeli brokerage — but only with deliberate security selection and coordination with a cross-border advisor.

3. Owning Individual Stocks Directly

Another PFIC-free approach is simply owning individual stocks — U.S. or non-U.S.

Why this works:

• Individual stocks are not PFICs
• No Form 8621
• Accessible almost anywhere

The trade-off is diversification: it requires more time, capital, and knowledge to build a balanced portfolio — but for some investors, the clarity is worth it.

4. Cash, Bank Interest, and Bonds

Sometimes boring is beautiful.

• Checking and savings accounts
• Term deposits
• Directly-held bonds

These are not PFICs.

Interest is taxed under normal U.S. income tax rules, with no special reporting regime.

Directly-held bonds — including U.S. Treasuries, corporate bonds, and individual foreign bonds — are also generally PFIC-free.

For Israel-based clients, banks such as Bank of Jerusalem currently offer digital savings accounts with interest rates often around 3.5%–4%+, depending on term.
https://www.bankjerusalem.co.il/en/deposits-and-savings/deposit_products

The Bottom Line

PFIC rules are restrictive — but they do not mean you are banned from investing.

With the right structure and the right platforms, it is entirely possible to build a long-term, compliant investment strategy without PFIC stress.

If you’re not sure whether your current investments are PFIC-free, or you want help building a compliant plan, professional guidance can make all the difference.

Disclaimer

This article is provided for general educational and informational purposes only and does not constitute tax, legal, investment, or financial advice. Reading this article or communicating with Cole & Waxman Tax Services does not create a client relationship.

The investment platforms, financial institutions, and products referenced in this article are mentioned for illustrative purposes only and do not constitute endorsements or recommendations. Availability, eligibility, and suitability vary by individual circumstances and jurisdiction.

Before making any investment or financial decisions, you should consult with your own qualified tax advisor, financial planner, or other professional who is familiar with your specific situation.

The post If Everything is a PFIC, What Can I Actually Invest in? appeared first on Cole & Waxman Tax Services.