• The Federal authority – Internal Revenue Service
• The State tax authority in the state in which you stay

The report is on income from wages, consulting fees, research grants, interest, dividends, and others.
There are some kinds of income that under certain conditions are tax free.

There are several different types of tax returns that can be filed, and the type of tax return (report) depends on the type of U.S. visa you have. In most cases, sabbatical members get a H-1, J-1, or Q-1 type visa, and different professional considerations determine what type of tax return needs to be filed, which incomes need to be included and what expenses are deductible.
It is recommended to consult a professional who knows well the U.S. – International tax implications and can recommend the best way to save the most taxes.
The types of expenses that are deductible depend on the type of tax return. In some cases the temporary living expenses in the U.S. can be recognized as expenses against income; if the stay is temporary and for less than one year then all travel, lodging and meal expenses are tax deductible. If the stay is longer than a year, a different type of report is needed and each case will be looked at individually.

After subtracting the expenses from the income, there are some personal exemption deductions which are different in the different tax reporting types.
The remainder is the taxable income on which the tax is calculated.

During the year federal and state taxes will be withheld from salaries. At the end of the year a form W-2 will be issued by the employer, summarizing the total income for the tax year and the different withholdings amounts. If the final calculated taxes will be higher than the withholdings there will be a tax due at the end of the year. If the final calculated taxes will be lower than the withholdings there will be a tax refund.

The Federal Tax System is the same all over the United States.
The tax returns to the different states are different, and each state has its own tax laws.
The tax year starts January 1 and ends December 31. The tax returns in most cases have to be filed by April 15 following the end of the tax year.

Most of the sabbatical people will have to file tax returns for two years since most of the sabbaticals start in the summer – the middle of the tax year. This fact can have more tax considerations to take into account.

On January 1, 1995 a convention between the government of the United States of America and the government of Israel with respect to taxes on income went into effect.

The convention is designed to avoid double taxation and the prevention of fiscal evasion with respect to taxes on income.

There are situations where a resident of Israel will work in the U.S., earning U.S. source income, and will be exempt from U.S. federal income tax.
In other situations where a resident of Israel will work in the U.S., earning U.S. source income, and will be subject to U.S. federal income tax. In these situations, a credit will be given against Israel income taxes for the taxes paid to the U.S. government.
In the case of a resident of Israel who is also a U.S. citizen or a U.S. permanent resident and will work in the U.S. earning U.S. source income, both U.S. tax rules and Israel tax rules will be applied, though attempting to avoid double taxation on the same income.

Article 23 deals with the tax exemptions of teachers, Article 24 deals with students and trainees, and other articles deal with other types of income that may be tax exempt or taxable according to this convention.

Whenever a resident of Israel is exempt from U.S. tax according to any of the articles of the treaty, that income will have to be reported in Israel.

The purpose of the treaty is to avoid double taxation on the same income, it is not intended to reduce any taxes, and it does not exempt from filing federal and state tax returns.

There are some preparations that need to be done before leaving Israel and after arriving in the U.S.

1. Obtaining Social Security numbers for yourself and all family members. In cases where a Social Security number will not be issued, an Individual Tax Identification Number can be obtained.
2. If you are exempt from U.S. Federal tax by treaty, you can file Form 8233 with your employer so he won’t withhold federal taxes from your salary. You will still have to file a tax return at the end of the year, as mentioned before.
3. Holders of J-1 and Q-1 visas have to verify that Fica / Social Security taxes are not withheld from their salary. J-2, H-1, E-1 and L-1 visas are not exempt from Social security tax.
4. At the end of the year the employer will issue an annual salary summary – form W-2 or form 1042-S. Other types of income will be summarized on different 1099’s forms such as 1099-INT for bank interest income, 1099-DIV for dividends, etc.
5. A letter from your employer in Israel stating that you are on leave for a certain period of time is recommended. You may need such a document if your status in the U.S. needs to be verified.
6. It is important to keep the following documents and receipts that may be needed for tax purposes in the U.S. and/or in Israel:
Housing leases, rent and utilities receipts, airfare and hotel receipts, automobile documents such as purchase and sale certificates, insurance papers, car rental receipts, and receipts for purchases of professional literature, computers and accessories and other professional supplies.