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Thursday, August 06, 2009

Another Fraud Case Is Likely and More Notes on the "Legal Symposium"

The Muqata is reporting that the Feds have arrived in Israel to investigate possible fraudulent US/IRS tax rebates and citizenship/naturalization claims. I have a terrible feeling about what the end results will yield.

Years ago, I was on the receiving end of an email going around telling people to inform their family and children who made aliyah that they might miss certain tax credits. The email went on to detail how to get those credits. I emailed the sender of the email stating that I didn't think these credits were available to those the email was targeting (wish I still had the email and could recall the exact details). I received some sort of convoluted answer as to why they were "technically" eligible for these credits, but the explanation didn't quite pass muster with me and I stated as such to the sender. But, what do I know? He has a far fancier resume than me.

I forgot about this conversation until someone with a family member living in a different foreign country told me that said family member had claimed certain credits (based on some mesorah in her community) and had received a large somewhat massive tax refund after filing current and back years returns. Once again, the circumstances surrounding the claiming of such credits didn't quite make sense with my own understanding of how the tax system works, although I certainly don't have expertise on each possible loophole out there.

Note that I used the work "mesorah" to describe a lot of what goes on. What particularly bothers me most about the Spinka Rebbe's speech which I recently mentioned in a post is that it white washes the magnitude of the current situation the Jewish community finds itself in today (I do admit I that only could understand the English portion). The seemingly endless audits and investigations are, in my determination, the result of years of "red flags" in numerous systems.

The Spinka Rebbe made it sound as if his institutions and others just simply didn't know that what they were doing was illegal, deceptive, and fraudulent. The Rebbe stated: "I’d like to tell you that we’ve learned it’s possible to lead Torah and chessed organizations in accordance with the law. Yes, it is possible. People think it cannot be done, but we’ve learned this the hard way. There are now charedi lawyers and accountants who are experts in this area to ensure everything is run according to the law. When in doubt whether or not something is legal, we cannot make that determination on our own, chas v’sholom. We have to ask a lawyer how to conduct ourselves properly in that situation.” "

This current investigation, investigations regarding money laundering, investigations regarding welfare fraud or lunch money fraud are not investigations about people and organizations who forgot to cross some t's and dot some i's. These investigations are about organized crime and a "mesorah" of how to game the system. And, I think we might have lawyers and accountants to thank for passing on the mesorah.

There were always "chareidi lawyers and accountants" with enough expertise to tell the head of a yeshiva, kollel, or discretionary fund that it is illegal to take money from a "donor," route the money from account to account and country to country, and eventually return 80-95% of the money to the "donor." You don't need to pass the Bar or the CPA to know that this is illegal. I do think there is a need for more legal advice regarding employment and establishing benefits packages and the like. But that is more a matter of doting i's and crossing t's. Organized crime is ORGANIZED, i.e. deliberate.

"Arranging" your income, misrepresenting residences and citizenship, hiding your savings are examples of intent to game the system and are not mistakes. Depreciating an item over 3 years instead of 5 years, forgetting to subtract out a service from your property tax bill when you itemize, or forgetting to report interest income because a 1099 never arrived in the mail are normal mistakes and are likely not of particular concern to the IRS. Claiming certain credits while living abroad is of concern and I (sadly) can already see the headlines.

I'm trying to be somewhat positive about the "Legal Symposium" and I hope it is the step in the right direction, but for years now an entire "mesorah" has been being passed around about how to work the system. You'd have to live in a cave to be unaware of such things because quite a bit of it is out in the open. Now that "mesorah" is catching up with us and playing dumb is yet another misrepresentation in my opinion.

I think it is important for those of us who want to see a mesorah that is based on Torat Emet, yashrut, and general simplicity to make sure that our voices are heard when we get wind of various scheme because the bad apples are spoiling the bunch. I know that I don't want to be associated with fraud and deception the next time I apply for a job.


Anonymous said...

Just last week, we got the kupat hair yeshous brocure talking about how someone donated to the tzedakah so they were able to get an appt for their 9 children in the US for citizenship since that somehow gets them money. I wondered how they manage that but now I know.

The miracle was that they had to cancel the original summer appt since the rosh yeshiva said it is assur to go to the US in the summer, but they managed to get the winter appt in the nick of time!

Anonymous said...

not disagreeing, but also keep in mind a Famous Quote from Judge Learned Hand

"Anyone may arrange his affairs so that his taxes shall be as low as
possible; he is not bound to choose that pattern which best pays the
treasury. There is not even a patriotic duty to increase one's taxes.
Over and over again the Courts have said that there is nothing sinister
in so arranging affairs as to keep taxes as low as possible. Everyone
does it, rich and poor alike and all do right, for nobody owes any
public duty to pay more than the law demands."

joel rich

westbankmama said...

The main problem is that many charedim do not work and they claimed that they paid taxes here in Israel in order to get the refund, which is illegal.

Anonymous said...

Even if there were no chareidi accountants and lawyers, why would that be an excuse? Is is assur to deal with anyone who has ever had contact with the outside world? Even the chareidi professionals had to go to professional school. Even if they somehow went to an all-frum institution, they would have to take the bar or CPA exam with non-Jews. They have to keep up on case law and precedents, if they're any good. So why is there this remark about chareidi accountants and lawyers?

Anonymous said...

tesyaa: I thought the exact same thing when reading the articles on the symposium. If these rabbis were sick and there were no charedi doctors, would they simply not get treatment? Why is it ok to have non-charedi (and non-jewish) house cleaners? Will they drive a car built by a non-haredi?

SephardiLady said...

Joel-There is absolutely no problem in arranging your taxes to your favor.

I believe I know what is doing on here and it isn't about legally minimizing taxes.

Commenter Abbi said...

Sorry SL, I think you're wrong on this one at least when it comes to the tax credits themselves ( i have absolutely no idea what the tax fraud case involves).

The tax credit is called the Earned Income Tax Credit.

You can read about it here:,,id=96406,00.html

Any US citizen can file. We are far from charedi, both my husband and I work full time and we have filed for these tax credits, with the help of my father in law, who,again is far from charedi and does everything by the book. We used our current mailing address here in Israel and reported all savings, income and spending down to the last babysitter shekel. There's nothing illegal about filing a tax return and getting a refund. I'm sure some Americans probably resent the idea that American citizens not living in the US are getting "free" money from the government. But you'll have the take that up with the IRS or your Congressman/woman.

SephardiLady said...

How do you get by the residency test for qualifying children?

susie said...

The parents are getting th ecredit - they have to have resided in the US in addition to being citizens - thus most olim, and kollel couples in ISrael, are 100% legally collecting this money. The children have to have US citizenship (which they do, being born abroad to Americans) and social security numbers (which they do) even if they are "sabras." The SCAM is about the children of olim who they themselves were born in Israel, grew up, had kids, and fly to the US to pretend to be residents and then claim the money for their children, who are also US citizens. I'm a new olah, and I am entitled to these breaks as much as any other American who moves to London or Toronto to work. Let's not mix up the legal with the illegal. I worked in the US for many years, and I paid a lot of taxes, and I don't want anyone to think everyone getting their rightful benefits is a crook.

Commenter Abbi said...

What Susie said- the children don't have to have resided in the U.S. At least one parent has to have resided in America for a certain number of years between the ages of 10 and 18 I believe and they ask for such documentation once you register your children for U.S. citizenship (i had to bring High School transcripts and my college diploma when I registered my oldest for a Report of Birth Abroad ie: an American birth certificate).

Susie, children of olim can fly to the U.S and claim citizenship through grandparents and it's perfectly legal. They have to do it in the U.S because it involves naturalization. You can read about the process here:

This is information on how to report a birth at the embassy:

In short, not sure what this scam involves, but claiming these tax credits is perfectly legit for U.S. citizens, no matter where they live.

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