Do I have to pay taxes on the Upwork service fees?

[ekolis]

Or only on the money I actually receive? Not sure which counts as my gross income - the total amount billed or the amount I actually receive.

Thanks! 🙂

[prestonhunter]

You live in the U.S.

The basic answer is: Only on the money you actually receive.

Example:

Upwork project payment = $100

Upwork service fee = $20

IRS expects you to pay tax on $80

(Consult local tax experts about exactly HOW you to file based on your individual circumstances.)

[a04ab00f]

And if you do not live in the United States but you're a US Citizen. how does that work?

[wlyonsatl]

Edward.

Each January you will received from Upwork a Form 1099-K detailing your gross monthly billings for the previous year.

You can get the actual deposits from Upwork into your bank account for the previous year from your bank, or you can download all transactions related to Upwork from the Upwork Web site under Reports/Transaction History (such as for the period 1/1/18 through 12/31/18) and use software like Microsoft Excel to sort all your transactions into groups (hourly pay, Upwork’s service fees, etc.)

.

The IRS is usually only interested in having you pay tax on your net income, so Upwork’s fees are Upwork’s income to pay tax on, not yours. 

[tlsanders]

Will, very few freelancers receive a 1099 from Upwork. That happens only if the freelancer has BOTH earned more than $20,000 and had more than 200 transactions in that tax year.

[kellycarreon415]

I have a follow-up question, I made over 20,000 this year. I get paid weekly so I am assuming I won't meet the 200 transaction threshold. So I won't be eligible for the 1099-K...my question is, how am I supposed to handle my taxes without this? 

[lysis10]

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Kelly C wrote:

I have a follow-up question, I made over 20,000 this year. I get paid weekly so I am assuming I won't meet the 200 transaction threshold. So I won't be eligible for the 1099-K...my question is, how am I supposed to handle my taxes without this? 

---

Transaction report and earnings by client report give you gross income.

[vladag]

Hi Kelly,

You are correct, only freelancers who qualify will receive 1099-K from Upwork. You can find more information in this Help article and I'd recommend checking out our last year's webinar on this subject. You can directly access the webinar recording by selecting the event registration link and filling out the registration form with your name and email address.

[browersr]

For clarity given the above post, you will only receive a 1099-K from UW if you have at least $20k in earning AND 200 or more transactions. Otherwise you will receive nothing from UW.

See this article for more information: https://support.upwork.com/hc/en-us/articles/211063958-Report-Income-from-Upwork?flash_digest=8cf854...

As was also stated, for purposes of federal taxes you pay based on net not gross. However, if you live in WA you get to pay B&O taxes based on the gross amount. Check your state requirements. 

You should enter the gross amount in earnings and then enter your fees as part of your business expenses. The result is the same in that you pay tax based on net but you are properly accounting for earnings by entering in this way.

[wlyonsatl]

The 1099's aren't very helpful in filing income taxes with the IRS anyway

You can just sort for "Withdrawal" in the downloadable file I mentioned above - those numbers will be - or be very close to - the amounts transferred to your bank during the year, which is your net taxable income unless you leave money in your Upwork account rather than transfer it all to your bank.

But the IRS would prefer you put the gross numbers on your tax returns and put in as deductions against your gross Upwork's 5% - 20% fees, membership fees, etc. as a cost of your business, so you might as well download all of the information Upwork provides and then you'll have what you need in one file.

Good luck.

[browersr]

Actually I recommend using the "Earnings by Client" report and enter the proper dates. This will give you two amounts at the bottom: "Total Billed" and "Fees Paid". This gives you everything you need for both amounts without having to sort through other reports in Excel, etc. 

[mtngigi]

As a self-employed freelancer, you can write off the Upwork fees as a business expense. There's plenty of info on the IRS site about filing if you're self-employed.