@rjs wrote:
To be clear, if you are a contractor (self-employed) it doesn't matter where your clients are. You are operating a business in the United States (even if it's just a one-person business). Your tax return is the same, whether the clients are in the United States or a foreign country.
If you are being paid in foreign currency, you have to convert all foreign currency amounts to U.S. dollars. All amounts that you enter on your tax return must be in U.S. dollars.
If you are an independent contractor, the federal government taxes you based on where you live when you do the work, not where the client is based. The state where you live will also tax you on your world-wide income.
If Israel also taxes your income, you may be able to claim a treaty benefit, a credit or a deduction. I'm less sure how that works than if you were working overseas, ask if you need more help.
And, if at any time during the year, you own or control a foreign bank account worth more than $10,000US, you have to file an "FBAR" report, although this does not come with extra tax owed.
