Figuring taxes

[c687d3f8]

Hi everyone,

I'm just wondering when figuring out taxes do we use the total paid by the client for our gross income, or do we use te total upwork pays us because they take their 20% service fee before we receive any payment.

I feel like we are supposed to use the total that the clients pay, and probably claim the upwork service fee as non-taxable business expense - I'm basically just asking someone to confirm that.

[wlyonsatl · Accepted solution]

Katrina,

As a US taxpayer I show the gross amount of my clients' payments and deduct Upwork's various fees and other deductions to arrive at my income for US federal income purposes.

You'd get the same taxable income number if you just showed the amount of net payments you've received over the year from Upwork, but the government wants to know the total value of your production, which is the amount of money your clients paid to Upwork for the work you did.

Also, itemizing Upwork's fees might allow you to reach the total deductions threshold that allows you to itemize all of your deductions, which might allow you to have a greater amount of total deductions than the standard deduction amount.

I hope this helps.

[c687d3f8]

That makes a lot of sense, thanks for the great response 😁

[marksudell]

Do you know what line on the Schedule C that goes under? Would it be Commissions and Fees?

[researchediting]

---

Mark S wrote:

Do you know what line on the Schedule C that goes under? Would it be Commissions and Fees?

---

I consider it a commission. Upwork calls it a fee. Schedule C counts those as a single category. I let my accountant make the final determination of how to categorize my expenses, and follow his guidance in preparing my books for him for subsequent years.

[researchediting]

---

Will L wrote:

You'd get the same taxable income number if you just showed the amount of net payments you've received over the year from Upwork, but the government wants to know the total value of your production, which is the amount of money your clients paid to Upwork for the work you did.

Also, itemizing Upwork's fees might allow you to reach the total deductions threshold that allows you to itemize all of your deductions, which might allow you to have a greater amount of total deductions than the standard deduction amount.

With respect to Upwork earnings, one may give the IRS net income or gross minus commissions (which, disregarding for the moment other Upwork expenses, should yield the same figure, as you suggest). The IRS is explicit in not preferring one method over the other.

There is no "threshold" for business deductions on Schedule C, which treats Upwork commissions, Internet charges, computer upgrades, and postage stamps all the same: they are all business expenses, and all deductible. Business deductions are entirely separate from the personal deduction on the 1040, whether that is the standard deduction or itemized.