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I'm a freelancer. I sent an invoice to my client (using InvoiceBubble.com), which he decided to pay via Paypal. Paypal took a fee.

How do I take this fee in consideration for my accounting? I marked the invoice as paid for $877.83 but really I received $852.07. How does this work with accounting and taxes?

Now that's not a big difference, but it can add up with several clients, some with much larger amounts.

8

The exact heads under which you classify this would vary from country to county. Essentially you would need to treat as;
- The fee charged by Paypal as Expense under some head.
- The taxes would be on profit, so apart from your cost, the fee would also get deducted as expense and tax would be on the profit after this.

  • 2
    Treated the same as any bank charge on an account transaction... – Turukawa Aug 9 '11 at 13:32
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You should classify this as an expense in an account called Bank Service Charge.

  • But is there like a "receipt" from paypal to show that I paid fees? – nute Aug 11 '11 at 8:07
  • 2
    @nute The paypal page shows the fee they took. – Michael Pryor Aug 11 '11 at 13:02

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