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.


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

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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