Follow up and ramping up for the new year
Last month’s article titled “When your money isn’t there for you” elicited a deluge of emails from readers commenting on various facets of the article. I felt that I should share some of the feedback that resonated most strongly among some readers (duly summarized, with my comments in bold and parentheses).
• Some readers were shocked that people even used money changers for cashing US dollar checks. They pointed out the ease of use of remote check depositing applications which enable you to remotely deposit your check and then take out cash using your ATM cards at little or no cost. (While this option is great for the technologically sound users, not only does it not work for many who are more challenged technologically, but it also doesn’t allow large withdrawals or transfers needed for real estate transactions or the like. Many banks are continuing to tighten their requirements for authorizing international bank wiring instructions, whereas check cashing has generally been a much easier and immediate, albeit more expensive, option.)
• Some readers confirmed that not only has Chase recently restricted wiring money overseas, but other institutions have also restricted transfers with various rationales cited: they include the new US financial accountability regulations and their associated financial liability, and the increased costs involved that make it prohibitive to allow these transfers. (So while the transaction might not be too expensive, the various costs related to the transactions, like fulfilling the ever-increasing US regulatory environment, money laundering requirements etc, make it increasingly difficult for us to access our money in US banking institutions. Not to mention the US banks and brokerage houses who have decided to close accounts owned by non-residents – a growing phenomenon.)
• Others expressed fears related to the long term financial stability of the US economy and its currency. (One needs to have a high level of trust in government not to be concerned about possible money grabs or tightened regulations/requirements. Just like the government has been punishing savers by artificially lowering interest rates, bailing out too big to fail companies who took unjustified high risk, they might also eventually regulate where and how we invest our money. As one client wrote, “my greatest fear is the government saying we must all put a certain percentage of our money into US gov’t bonds when everyone stops wanting to buy them … have heard this happening in Russia with retirement accounts and also in Poland”.)
… and now for the article I was planning to write …
End of year thoughts
As we approach the end of the calendar year, there are no shortage of financial issues that people need to be aware of to ensure that they are positioned correctly coming into the new financial year. I mentioned some in my article last year, but they are important enough to warrant repeating.
• Donation receipts – If you are taxable in Israel, ensure that you are utilizing your tax approved donations (section 46 approved in Israel) that can save you 35% of the amount donated. Going to Mas Hachnasa prior to the end of the year can immediately reduce your taxes owed and save you the 6-9 month wait if you file a full return after the end of the year. Americans living in Israel and filing tax returns can also use American charitable receipts to reduce their tax liability.
• Foreign trusts – Any Israeli with a connection to a foreign trust needs to consult a tax attorney or accountant to discuss how the recent changes in the trust legislation affects them. Any necessary changes will need to be made prior to the end of the year so time is of the essence.
• Mistakes in our savings plans – We all contribute to various savings plans through our work, including Kranot Hishtalmut, Kranot Pensiah, Bituach Menahalim policies and Kupot Gemel. But how many of us actually check to ensure that all deductions from our salary (together with our employer’s matching contributions) are received in their entirety into our various accounts. Mistakes happen all too often and they can be very costly. It’s critical that you match the deductions on your pay stub (tlush) with the actual contributions to ensure you receive what you deserve. If you’re unclear as to how to do this, sit with someone who can show you how the system works to ensure you are maximizing your savings potential over your lifetime.
• Planning during the winter months – The relatively quiet months of the winter (especially during a Jewish leap year where we have an extra quiet month before Purim and Pesach) give the average person time to ensure they are on track financially. The end of the secular year also provides an excellent point in time to take stock and make adjustments in our plan. Putting a plan in place during the downtime gives you the opportunity to plan for the more hectic times of the year. Take advantage of this period of time to start saving for the heavier expense months in the spring and summer.
• Tax compliance – This continues to be a very important element to evaluate. Recently, the Israel Tax Authority (ITA or mas hachnasa) began a targeted enforcement operation to detect tax evaders who are not reporting and paying taxes on rental income. Following a successful operation in Tel Aviv, Ashdod was recently targeted to locate foreign residents who are renting out apartments. If you are unclear of your tax status, speak to a professional to ensure that you are not breaking the law.
Avoid complacency! Proper financial planning can help you maximize your resources, take advantage of changes in legislation and protect you from unpleasant visits from tax officials. The world is getting smaller in many ways as compliance and cooperation are the global way forward. Preparation is more crucial than ever.