Taxes

burkeykaren · ‎02-14-2018

Are Upwork fees considered a business expense for tax purposes?

jmlaidlaw · ‎02-14-2018

For a completely reliable answer to this, you should consult a tax professional. (Hire Joe Chernow!) However, I will tell you that I live in the U.S. and am scrupulously honest with my taxes and that I deduct UpWork fees as a business expense.

jcullinan · ‎02-14-2018

@Karen B wrote:
Are Upwork fees considered a business expense for tax purposes?

For US taxes, there are two ways to deal with your Upwork fees.

1. Report your full, billed, gross income number (can be found under the "Earnings by Client" report, but make sure it's accurate - mine never is), and then deduct the fees as an expense.

2. Report only the amount of income deposited in your bank account (your "net"), and do NOT deduct the fees as an expense.

I prefer the second method because it's easier, and I keep better records than Upwork's generated reports. The accountants I consulted both confirmed that either way is fine, as long as I maintain a paper trail in case of an audit.

sam-sly · ‎02-14-2018

Yes, it does depend on how you calculate your taxes though. This is just general information, I am not a tax pro. It actually should work out the same whether you report the total and deduct Upwork's fees or whether you just report your net.

On my taxes, I go with whatever method has the best paper trail. I work through a few platforms that all report differently.

- For Upwork, I use the earnings by clients sorted for the year. That report lists total and fees so I report the total then deduct the fees.

- I receive a few 1099s so I report what the company reports assuming it is correct (occasionally it is not).

- If I don't have a 1099, I look for a report on the platform (hence what I do with Upwork). If there isn't one or it is a direct client, I report the amount I receive in PayPal or my bank account. (I deduct any PayPal fees).

Sorry if that sounds complicated. I basically use the most official paper/e-trail that exists assuming it is correct. It gets a little more complicated the more income sources you have. I opened a free checking account for my freelance business transactions to make it easier to keep track. I know some people do similar with a PayPal business account, I just prefer to use a bank (actually a credit union).