One of the major financial perks of being an American Oleh is eligibility for Social Security. In addition to the money you can get from bituach leumi (~₪2,000) and your keren pensia (depending on what you put in) Social Security entitles you to an additional payment upon retirement of anywhere between ~$250 and ~$2,500 a month. Also, in the unfortunate event of your passing, your spouse (even if he or she is not American) would continue to receive the payment until his or her death. It’s a huge benefit worth having and it is worthwhile to make sure you are eligible for this benefit.
In order to be eligible to work for Social Security, an American citizen needs to pay in to Social Security enough to earn 40 credits or quarters. To earn a quarter, one must pay Social Security taxes (FICA, which is 15.3%) on wages earned on $1,130 of income (the amount changes every year in accordance with the national average wage – so it was less in the past and will be more in the future). You can earn up to 4 quarters a year by paying Social Security taxes on $4,520. To be clear, even though these are called quarters, you do not have to earn $1,130 during every 3 months, the amount can be spread however you earn money during the course of a calendar year. For example, if you have a summer job where you earned $3,800, you would earn three quarters, even though you only worked 2 months. You can check how many quarters you have on the website for Social Security by clicking here (http://www.ssa.gov/mystatement/).
It is very common for olim who made aliyah in their 20’s and early 30’s to find that they worked just below the line of 40 quarters and that they are therefore ineligible for Social Security. But if an oleh finds out about this in advance, he or she can take the necessary steps to ensure that he or she receives this benefit. As a rule, Israelis do not pay into Social Security unless they work for an American company or are self employed.
There are four ways to pay into Social Security while working in Israel:
1) Register and work as an atzmai (and thus pay FICA)
2) Work for an American business (and pay American taxes including FICA). Ask a friend or relative in the states if you can do some seasonal work for them in order to earn your few remaining quarters.
3) Receive payment as sachar sofrim for a one time event. You’ll have to do a te’um mas (https://www.misim.gov.il/shteummas) and also a te’um bituach leumi (http://www.btl.gov.il/Insurance/Teum/HafakatHishur/Pages/default.aspx), but it counts as if you are an atzmai (and you pay FICA on it.) Not everyone likes to pay this way. I asked the people in my billing department to pay an Israeli supplier this way once and they were not happy.
4) You can try to pay taxes on your billing company profit. While one accountant with whom I spoke said this is possible (he admitted it would raise a red flag, but said it could be fought successfully), two others said that this possibility is entirely out of the question. One accountant told me “people go to billing companies in order to avoid paying Social Security. You can’t just pay when it’s convenient for you, claiming you’re independent, and then claim you’re no longer independent when it’s not convenient for you. Either she’s pregnant or she isn’t.”
As a final note, don’t try to commit fraud. If you open a tik just to pay yourself the minimum and get your 40 quarters, Social Security will find out. They actually have an office in Jerusalem whose sole purpose is to look for stuff like this.
Shomer Shekalim 