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.

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A lovely time at Mas Hachnasa

March 25, 2008

After getting a tip from a member of CIWI (Connecting Independent Writers in Israel that:

The Income Tax department (mas hachnasa) is currently offering free guidance on filling out your 2007 tax return (for salaried employees) or annual report (for atzmaiim). It just started on Sunday and will go until the end of April every afternoon between 4pm and 7pm at their office on Kanfei Nesharim.

I went yesterday at 4pm and there were only two other people waiting! The clerks warned that in a few weeks it will be bedlam. (I went later last year and I remember that there were about 50 people waiting and most were not in a good mood). Therefore my advice is to go ASAP!

The clerks were relaxed and patient, and my report was completed and submitted in 15 minutes, without me paying a penny to a tax advisor.

As always before visiting a government office, you should call ahead to make sure that you know which documents you need to bring with you.

The no. for Mas Hachnasa is 654 5111.

Behatzlacha rabba and happy Purim!

I figured I have nothing to lose, free is nice. Luckily my son’s dentist appointment was pushed up to 3:10 yesterday instead of 5, so I could put him on a bus back to Maale Adumim in time for Krav Maga, and walked from Machaneh Yehuda to the Central Bus Station/Center One.

You might remember that Mas Hachnasa has a main Jerusalem branch on Kanfei Nesharim, and in fact the CIWIer quoted above pointed me to that location. But since the Center 1 office was walking distance, and I’d been told that the Center 1 spot services Judea and Samaria residents, I figure I’d give it a shot.

Sure enough, I got there at about 5:10, and the place looked abandoned. Even the wall signs announced closing times no later than 5. But someone walking out told me that I could get service on the 6th floor, room 615, and I made a beeline for there.

There was no one in that room, but the lights and the computers were on and I had a feeling they were on a coffee break. The resident of room 614 said he might be around, and was nice enough to go find him.

Well, as Ms. Ciwi predicted, no one was on line before me, and no one after me.

To make a long story short (after you’ve suffered through all this fluff:-), I learned the following things:

  1. If you make less than about 50K NIS a year, and in some cases, less than 70K or more, Mas Hachnasa isn’t going to take any money from you.
  2. You are strongly urged to keep good records of your business, first and foremost for your own good. If you document all business related income and expenses, you are OK.
  3. If you project to make less than the minimum to require tax payment, you can disregard the Pinkas Mikdamot (pre-pay tax stub booklet) and request to be relieved of prepaying at the Gvia department. (I’ll blog about my doing this, of course).
  4. If you request to be relieved of prepaying, you might be asked to provide a report/declaration of your income and expenses / profit and loss. (if you follow rule #2 above, you are covered)
  5. You should keep a pinkas kabaklot (receipt book) to document your income, and a sefer tashlumim vetakbulim (payments and receivables book), and whatever other diary you keep will be good too. Again, mostly for you, and if necessary, for the taxman too.