Paypal and U.S. Checks and Israel Income Tax

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.

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10 Responses to Paypal and U.S. Checks and Israel Income Tax

  1. Hmmm… You really want to pay taxes for the website? What for?

    • Gidon Ariel says:

      Shalom Nikita, thanks for visiting and commenting.

      I want to pay taxes on my income as required by law. Right now, i am not required, as I am an osek patur, i.e., to low an annual income to be taxed. When I make enough money, I will be proud to pay my share.

  2. binyaminyakov says:

    Hi

    I was wondering why you write yourself a check? Is that cheaper than using an american debit card at an israeli bank machine or you just don’t have a card?

  3. Gidon Ariel says:

    Hi Binyamin Yakov,

    I would love to hear someone respond to this – using a card at a wall machine would probably be more convenient that writing myself a check and I do have an American debit card (through an RBC bank account that I opened about 7 years ago), but I am guessing that this would be a much more expensive option.

  4. Tax Lawyer says:

    I’ve been involved in taxes for longer then I care to acknowledge, both on the private side (all my employed lifetime!!) and from a legal point of view since passing the bar and pursuing tax law. I’ve supplied a lot of advice and rectified a lot of wrongs, and I must say that what you’ve posted makes complete sense. Please continue the good work – the more people know the better they’ll be outfitted to comprehend with the tax man, and that’s what it’s all about.

  5. Gidon Ariel says:

    Thanks for the compliment, Tax Lawyer!
    But I prefer “tough love,” that is, tell me something I don’t know, something I got wrong:-)

    Looking forward to hearing more from you!

  6. […] Paypal and U.S. Checks and Israel Income Tax April 2009 6 comments […]

  7. Joe says:

    I know this is a very old post but I would like to know if the same thing would be legal if it was website payments to Paypal, then once a month bringing an amount into an Israeli bank and writing an invoice for esik petur to declare for Israeli tax purposes. In other words the same as you but without the American connection.

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