For the full interview Larry Stern, CPA (USA) Partner – US tax dept
Partner since 2015
Specializations: US and international taxation
You were born and raised in the USA – how did you decide to make Aliya?
I have always known that I would like to live and raise my children in Israel. My wife and I decided at a very early stage in our life together that we would make the move to Israel. And despite the high level of motivation we shared, doing it with two small children aged three and five was no simple undertaking – the responsibility was enormous! And like all new immigrants, we were also faced with numerous pressures: social acclimation, economic and professional adjustments, huge cultural differences and many other changes. Since then, more than 13 years have passed and I am proud that we are still here.
Looking back, I think that a large part of the success of the immigration process was thanks to my foresight to consult with professionals I trust, and they largely showed me the way. One of them is CPA Don Shrensky, who gave me wise and useful advice, and he is also one of the people who influenced my professional development. When I finished my accounting studies and had not yet moved to Israel, I came to Israel for a short period where I worked as an intern in CPA Don Shrensky’s, CPA Michael Brody’s and CPA Gershon Feldman’s small, close-knit office in Jerusalem. Through them I became aware of the field of international taxation, in which I am currently involved. No less importantly, through them I understood the enormous extent of power and help you can provide as an accountant to a client who is at a financial crossroad and subject to a dual regulatory system.
Tell me a little about your experience.
During my internship I mainly accompanied Don, Gershon and Michael to meetings with clients and events they hosted for new immigrants. Since I was at the start of my career, I did not work with clients directly but rather helped partners and mainly learned about the field by listening to them – I learned how to approach clients and solve problems. It gave me exposure and understanding of the responsibility and authority required of a good accountant. Not every person who is good with numbers can necessarily offer high-quality service. The key to success is in the combination of professional knowledge and skills, and your sensitivity when interacting with clients. And this is as true today as it was 30 years ago. Everyone has a different case that needs to be considered. Every person who turns to you for advice has his own story and needs both a personal and professional approach when working on tax planning.
What do you mean by tax planning?
Each person has a limited number of resources, whether it’s capital, property, salary, etc. Professional help from an expert CPA allows that person to look at the big picture and optimize his situation – where can you save? Are there possible ramifications that need to be considered?
I’ll give an example:
A client with dual Israeli and American citizenship came to us when he was about to retire, and made a wise decision when he sought a consultation before acting on his own. He wanted to withdraw a significant amount of money from his retirement funds that was tax-free in Israel. We checked the tax planning of his American CPA over the years and found that the accountant had not optimized the Israeli taxes he paid when offsetting his US tax liability. After a comprehensive review of the client’s file, we found that by amending his returns to better optimize the tax usage, he was entitled to withdraw 1,000,000 NIS tax-free for US purposes as well. In addition, we created a situation where he could even withdraw additional funds if desired by using remaining foreign tax credits made available due to the optimization.
The most important point is that annual tax positioning that takes into account not just the current tax filing but what could be used in the future can save a client significant funds down the road. Not looking at the full picture of one’s worldwide tax circumstances ahead of time can end up being quite costly in long run. This was not a rich client, but one that had saved for over 30 years into Israeli pension systems. Had this correction not been made, the client could have ended up paying 30% or more of his retirement account in unexpected US taxes.
After our intervention, we reached a situation where the client is able to utilize his retirement accounts in an optimal way. Along with accompanying him in tax planning, we also collaborated with his pension consultant and outlined a way of dividing the payments in order to use the tax credits optimally. This involved extensive deliberation – together with the pension consultant we made dozens of calculations on the utilization of the tax balances on the Israeli side, and found a number of points in the American taxation that could be offset. Our capabilities in the realms of “how”, “how much”, and “when” demonstrate our added value as accountants and our source of pride as a firm.
How did you become a partner?
The beginning of my career began in the USA with the “Big 4” firms, where I began to specialize in the field of international taxation from a US perspective. Fortunately, I was exposed to many interesting cases and this motivated me to continue delving into the field. This assisted me greatly in finding a solid position upon my Aliya. I knew I needed to expand my knowledge of Israeli taxes,which I accomplished by working in the largest Israeli CPA firm for a number of years.
An important milestone in my career was when I was given responsibility for opening an American tax department at one of the large firms. In Israel the need to gather information and provide professional and reliable responses from and to a lot of people made the department extremely active, and in a very short time the volume of work increased. I felt that I was able to help a lot of people. The ability to assist and help people is incredible. Many people are at the beginning of the process and do not know what they are facing, or even what important questions to ask. This is especially true when two tax systems are involved. A wrong decision can literally damage a person’s quality of life – “Ability to sleep at night” is not an empty expression, in the sense that when it comes to taking a big financial step that involves an individual’s financial and spiritual resources, he should know that all the options are open to him so he can make educated decisions. And this is where I, as an expert, enter the picture. I ask, listen and research, acquire an understanding of the situation, and present the full picture to my client. I actually put him in control.
This is the advantage of integrated knowledge and it is especially true for customers who are:
• Israelis who want to invest in the US
• Companies that want to open a business in the US and expand operations
• Relocation – foreign workers who arrive in Israel without immigrating (making Aliya)
• Americans who emigrate to Israel
In addition to my work as a department manager, it was important for me to also help people outside of working hours and to be a beacon for people facing taxation complexities. Therefore, I was very active on social networks and especially on Facebook and in groups of immigrants. This allows me to provide quick and reliable responses and help numerous people. Of course, there were others like me, one of them is CPA Binyamin Radomsky, a member and partner of the Israeli tax department at Aboulafia. Through him, I became acquainted with the firm and Yoav Aboulafia, and rest is history. This year I celebrated 8 years as a partner.
It’s important for readers to know:
There are many fascinating topics in my field, but estate planning is an unusual one. People who plan to bequeath assets should know the impact of taxation is a crucial player, so it is necessary to get advice as soon as possible.
Several years ago, an 80-year-old man in poor health came to our office. He was an Israeli who owned a large portfolio of securities in the US, and wanted to understand what would happen to the money when he bequeathed it to his children one day. It is important for me to note that an American citizen is exempt from estate tax up to assets of approximately 13 million dollars, but if you are Israeli and own American assets, including U.S real estate, shares, etc., all of these are considered American assets and the exemption is only $60,000. Because of his health condition we realized that we needed think a few steps ahead. What would happen to those investments when he was no longer in the picture? We contacted his investment advisor and together we completely changed the nature of the investments to these not subject to inheritance tax.
Three years after we met, the client passed away and his children received the full amount of the inheritance with requirements to pay estate tax. In practice, we saved our client money, which not only made the children happy, but also gave the father peace of mind regarding his children’s future.
The accounting profession – is it worth it?
There is never a quiet day. It is a high-pressured job, but very interesting. If you enjoy working with people, doing analyses, and have reasonable math and calculation skills, the field of taxation will not disappoint you. Working with different people from other countries and in different fields with two legislative systems never fails to intrigue me.
It is important to say that this is a profession doesn’t allow for rest and relaxation. We are constantly working to bolster our professional knowledge. Every year there are updates in the tax systems, and every year there are court rulings that affect the processes of previous years. There is no clear recipe: we constantly have to be on guard and understand how we can assist our customers at any given moment. In addition, we make sure to continuously meet with lawyers and investment houses in Israel and around the world in order to expand our network of contacts, so that we can give our clients smart solutions in all areas related to taxation. If I managed hold your interest, you are more than welcome to contact me – we are constantly looking for new additions to our family of accountants.
Always at your service,
Larry Stern, CPA (USA). Partner – US tax department