I'm using online payroll software to manage payroll for employees and contractors.

What category would the expense of this software fall under?

  • Are you given pre-determined categories or are you able to make your own? – trashpanda Mar 5 '15 at 15:22
  • This is usually "license fees" – littleadv Mar 5 '15 at 15:31
  • I can make my own categories, but I didn't know if it should fall under one of the main pre-defined categories tax form (in this case, for an S-Corp so 1120 S)... For example "Taxes and licenses" – sbuck Mar 5 '15 at 17:00
  • I'm no expert, but i'd put it in the same category as other basic business equipment. The fact that it's a software tool rather than hardware shouldn't matter... I think. – keshlam Mar 5 '15 at 23:54
  • @keshlam: I think the difference is that it's likely a monthly recurring fee (OP mentioned "online"). I know I prefer to have my monthly recurring in a different bucket than one time things. – NotMe Mar 6 '15 at 15:20

I wouldn't stress out too much about what you call the category. As long as it makes sense to you and your tax accountant it should be fine. Besides, it's usually pretty easy to rename a category in the future.

Just for reference, my accountant set up my categories (also for S-Corp) like this (though this was 8 years ago but I still use them today):

  • Dues & Subscriptions: for software and other things paid monthly/yearly.
  • Equipment-Computer: for computer related purchases and 1 time fee software purchases
  • We also have "Dues & Subscriptions". Everything from our gmail accounts to accounting software and online fax etc is stuffed in there. Basically, if it's a monthly recurring fee that doesn't naturally go somewhere else (like payroll...) – NotMe Mar 6 '15 at 15:18

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