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My Background
I am a sole proprietor (freelance programmer) and usually receive payment for projects by check. I send an invoice to my clients with a breakdown of my work and payment terms. Because of the long turn around checks are becoming for getting paid I setup a Google Wallet account and taught my clients how to pay me through that. Now I get paid much faster.

For any tax implications to this question and answer my business operates out of Idaho and California.

My Question
To discourage future clients from choosing the check option I would like to charge a $5 fee per check; which of course based on the client and situation I would waive.

  1. This is legal to do correct?
  2. Does this fee count towards what I have to pay taxes on (1099) since I'm charging it to discourage that option but not because I have a check processing fee?
  3. If I state it in the terms can I charge a $25 late/ bounce fee and does this also count towards what I have to pay taxes on (1099).

Similar Scenarios That Could Benefit Others
Does the answer(s) to the above question(s) change if:

  1. I do have some kind of fee from my bank for cashing checks.
  2. My bank or payment processor charges a 3.5% fee on payments made by card and I want to pass that fee on to my client.
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    You can charge your clients anything you want including extra fees to cover your basis. All charges will be counted as income and will be taxable. Fees by your banks are personal expenses and are not deductible. – NuWin Oct 15 '16 at 18:36
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    From a marketing point of view, it may be better to raise the price, then offer a discount for cash purchases. – keshlam Oct 15 '16 at 20:10
  • @keshlam - I never thought of that before since most clients are living states away from me but that is a very good idea to consider for closer clients. Thanks. – Blizzardengle Oct 15 '16 at 20:35
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You can charge a fee to accept checks, although I think the better solution might be to offer a small discount for early payment of your invoices. As some people here have suggested, why not add a small bit to your fees to begin with to cover your inconvenience in the case they choose to pay by check?

I often will give clients a small discount of 1.5% for paying my invoices within 10 days, which does motivate some to pay sooner, depending on the client and the amount of the invoice. If you've already added a small amount to your fees in the first place then providing the discount is good public relations that doesn't actually cost you anything.

You can always add a "convenience fee" for accepting checks, but this is a more negative approach, as though you're penalizing the client for paying by check rather than electronically. Some people do see it this way, despite any efforts you make to explain otherwise.

As to your question about adding fees for accepting credit cards, be very careful! There are sometimes state or local laws on this, and you could find yourself in trouble very quickly if you run afoul of one. Here's a good article to read on the subject:

Adding fees for accepting credit cards from CreditCards.com Site

I hope this is helpful.

Good luck!

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