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TexLaw, Attorney
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Experience:  Lead trial/International commercial attorney licensed 11 yrs
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I want to open a web based business - the business is as follows in

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I want to open a web based business - the business is as follows
in short: people pray for money let me explain...
people come on my site and they sign up as a "prayeree" I call a prayeree a person who prayes for someone for money - other people come on the site and pay $18 for a prayer - I charge credit card on the internet $18 per prayer and i send $9 to the prayeree (the person who prays) and i keep $9 - my question to you is do i need to pay any taxes? do i need to collect sales tax? the business is based in New york do i need to collect sales tax for new york customers? do i need to pay the end of year taxes and how much?
also i have another question I am USA and Israeli citizen - where is it better for me to establish this business in USA or Israel - where will i pay less taxes ?


Thank you for your question.

Sales tax is not applicable in New York for this type of service.

Depending on whether you incorporate or not, the business may have to pay income taxes and franchise taxes. If you do not incorporate, you will be liable to pay income and self employment taxes on your net revenue.

If the people doing the praying are not employees, then you will simply send them a 1099 at the end of the year for the amount of money you have paid them. They will then be responsible for handling any taxes that are owed from that income.

Corporate taxes in Israel are lower and income taxes are on par with the U.S. However, the question of international taxation often has more to do with where you intend on being paid rather than where you set up the business. If you set up the business in Israel but take payment in the US, you will be taxed in both countries. Further, the transaction costs involved in moving money from the US to Israel may outweight in potential benefits to setting up the business this way.

In the end, it's probably better to set up the business in the US.


Customer: replied 3 years ago.

the people who pray are not my employees but some of them are outside the USA - do i still need to send them a 1099?

Thank you for your response.

Sending them a 1099 reduces your tax basis within the US. Thus, you would want to send it out regardless of where the service provider is located. However, if the amount that is being paid out to the Prayors (for lack of a better term) is significant, you should consult with an accountant to see if there is a better solution to lowering your tax exposure.

Customer: replied 3 years ago.

can i open this prayor bussiness in the US accept credit card in a us bank and operate the bussiness in isreal ?

what date in the year do i need to pay income taxes?

what do you suggest i incorporate this type of bussiness or not?

Because the business is a virtual business, you can in fact operate it from Israel if it is located in the US.

However, I would suggest not incorporating until you earn enough money through the business to justify the expenses of incorporating and the compliance expenses that go along with that. I would suggest simply starting the website and running it as a sole proprietor.

Income taxes on personal income are generally due every quarter of the year. Here is a guide you can use:

Customer: replied 3 years ago.

how often do i send a 1099 to the prayors ? where and how do i make the 1099s

You send a 1099 to the Prayors at the end of the year (they must be submitted prior to January 31). It's only done once a year.

To send the 1099, you need to first obtain 1099 forms. To order the forms, you need to call the IRS and request the forms (or you can purchase the forms at a stationary store). Contact the IRS at 1-800-829-3676. You then fill out the form at the end of the year and send a copy to the Prayor and a copy to the IRS.

Customer: replied 3 years ago.

ok thanks alot i have one last question its regarding somthing else - its a general question - if i have 20,000 cash can i deposit it in my personal bank account ? will the goverment intefere and ask where i got the money from?

Yes, this will generally not trigger any sort of inquiry from the government.

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