Bonus as Income for Tax Purposes

[johnsonproofread]

Hello! Under the contract I am participating in:

1. I purchase a book from Amazon to edit.

2. The purchase price is reimbursed to me as a bonus.

3. Finally, I receive a small payment upon receipt of my edits.

Essentially, the bonus is meant to cancel out the money I put forth to purchase the book. However, am I right in assuming that this "income" will be taxed? In other words, am I losing money?  Thank you!

[prestonhunter]

re: "However, am I right in assuming that this "income" will be taxed? In other words, am I losing money?"

Upwork does not levy taxes.

Upwork does not make decisions about who is taxed, or what things are subject to taxes or not subject to taxes.

If you want to ask questions about taxes, you would need to talk your local tax authorities or experts.

I believe that the question you want to ask is:

"Am I right in assuming that the amount of money I receive from a client to reimburse me for purchasing the book... Does Upwork take its standard fee out of that? In other words, am I losing money?

The answer is:

Yes.

[johnsonproofread]

Thank you for your reply, but that's not what I meant. I am being paid enough to make up for the 20% being taken out.

When I go to pay my taxes, all the money I receive from Upwork, including bonuses, is seen as just income into my account, correct?  There is no differentiation between bonuses and regular payment for work, right?  From the point of view of reporting income to the government.

If that's the case, I am being double-taxed, unless I am missing something. 

Maybe I'm not being clear. But I don't know how better to explain. 

[johnsonproofread]

Hello! Under the contract I am participating in

1. I purchase a book from Amazon to edit.

2. The purchase price is reimbursed to me as a bonus.

3. Finally, I receive a small payment upon receipt of my edits.

Essentially, the bonus is meant to cancel out the money I put forth to purchase the book. However, am I right in assuming that this "income" will be taxed? In other words, am I losing money?  Thank you!

[mwiggenhorn · Accepted solution]

Personally, I would report the purchase price as an office expense and the bonus as income.

[johnsonproofread]

Thank you! I hadn't thought of that. I will do that.

[tlbp]

OP, before you get too much deeper into freelancing, you should look into the tax rules for "independnet contractors." You'll want to understand what taxes you need to pay and what deductions you can take and keep track of them throughout the year. Otherwise, tax season will be a real headache!