Paypal and U.S. Checks and Israel Income Tax

April 28, 2009

As I mentioned in my previous post, the Tax Authority advisor, Meni, and I discussed Paypal yesterday.

Meni had never heard of Paypal. So I filled him in a bit on that, and on my business model. Some of you may (and all of you should) have a similar model.

I have a website through which I offfer a service (http://www.holycityprayer.com; the service being membership in our organization. Among other benefits, we pray for our members in the Holy City of Jerusalem). Most members pay through Paypal. Some others pay by US Dollar personal checks.

In principal, you must give your customers an official receipt from your receipt book at the instant of the transaction, that is, the moment you get the cash or check and your customer gets the service or product.

However, in my model, I don’t get the money; [my account in] Paypal does.  Then, every so often (when my partner and I decide to do a distribution), I move some of that money from Paypal into my US bank account. When I want some of that money, I write myself a check and go to the local gas station 9who has a Change [foreign exchange desk] and get cash.

Some of my customers make very small payments (as little as $7 a month) and I am not interested in such frequent bookkeeping.

I suggested the following solution and meni said it’s ok:

When I transfer funds from my Paypal account, I will issue HolyCityPrayer.com a receipt for “services rendered <date of last transfer> to <date of current transfer>.” This will not be more frequent than once a month, and the internal accounting and clicks I have to do are so relatively complex and manifold, that writing a single receipt in my receipt-book will not add significant effort. And when I cash customers’ personal checks, I can also issue my receipt to HCP – my customers abroad hardly care about this Hebrew scrap of paper.

I’d love to hear your comments about this.


Mas Hachnasa advice hours

April 28, 2009

Sorry for not posting in such a long time, I hope this post will make up for that a bit.

Around February of this year, I got a form in the mail, a Hatzharat Hon (declaration of wealth/assets). I was at the Tax Authority (Rashut Hamissim) for something else, so I found a pakid who I could talk to about that. He basically said I have until May to fill it out and return it, so I immediately filed it in the “don’t think about until April” part of my brain.

About a week or two ago, I got about five forms in the mail, which looked like a tax return with a few appendixes. Since I had hit Snooze on my Hatzharat Hon alarm in my brain a few times, I figured I’d better get cracking.

So I  opened both forms, put a little “X” next to the lines that I was certain were NA (not applicable) for me (like “Profits from Owning Real Estate Abroad”); completing the lines I could easily (like “First Name”) and circling the line numbers of things I wasn’t sure of, whether requiring searching on my part (like “Balance Of Personal Bank Account On 31 December 2008”) or clarification by a Tax Authority advisor.

Then a flyer fell out of my folder, one that I picked up the last time at Mas hachnassa that I never really looked at. It said some thing to the effect of: “Free Advice Hours For Filling out Your Tax Return.” Just what the doctor ordered. However, I saw that it said “Every day from March 1 through April 30, 4-7 PM. Pessach Closed.”  Well, yesterday was April 27, today is Yom Hazikaron and tomorrow is Yom Haatzmaut, not days to expect service at government offices. So I made quick plans to go there (needless to say, calling any number I had or could find was useless). Then I saw that the flyer I had said “Mar 1 thru Apr 30 2008“! So I realized that my trip might be in vain, but I felt I had no choice.

I made not-so-good time, and arrived at Tax HQ at about 6:20 (and I still had to daven mincha:-). The guard said “you only have a few minutes left, hurry to the sixth floor.” One person was speaking with the pakid, so I was next on line. Another citizen or two arrived after me.

I spoke with Meni.

Bottom line: If you are a male atzmai, and you made less than 45,000 NIS last year, you are under the Taxman’s radar. As I thought, they won’t require you to bring all sorts of receipts etc. your declaration is enough. (A female atzmai [atzmait, actually] would ostensibly have a higher ceiling.)

Since I only had issued receipts during 2008 totaling about 12K  NIS (ok, I was busy with personal stuff, ok?), I was clearly under this radar.

BTW, Meni said, my wife, who is an employee, has a much higher ceiling – closer to 100K(!). She actually comes somewhat close to that (which is how we actually get to eat most of the year, thank God), but still low enough to keep Meni uninterested.

So all I have to do to complete the tax return (doch shnati – tofes 1301) is fill out a few lines on her side of the pages according to her tofes 106 (summary of financial statement for employees, provider by employer), and add some other income that Meni and I agreed that I should declare (via Paypal – see other post). I will come back to advisors’ hours after doing that, go over it with Meni (or whoever’s on duty, everyone I’ve met is great), finish anything else I need to on the spot, and come home and post to this blog:-)

Having such a small income, being under the Taxman’s radar, means that I don’t have to pay any income tax this year. The down side is, that I don’t get any tax rebates (they can’t refund me if I didn’t give them any).  This includes donations to tax exempt charities.

Important BTW – the deadline this year has been extended to May 30 2009. Whew!

Bottom line: Being an Osek Patur can still be costless, accountant-wise.

PS I made Mincha at the Tachana Merkazit:-)

Questions and comments are welcome!