Business Taxes Question

[danstelter]

Hey everyone -

I just started my own business and it's doing well enough so far. Here's a question I have about taxes:

I get paid mostly by Paypal (which charges a fee for every transaction). Some people also do paper checks.

In terms of taxes - is it any better to get a check with no fees and get taxed, or does it just even out if I take a Paypal payment and take the fees?

Thanks for your time,

Dan

[Stump1000]

I think even if you get paid through PayPal, you are still liable for income tax on the money you make. PayPal fees don't have anything to do with taxes.

[danstelter]

Wouldn't they be a business expense though?

[jpg7n16]

Originally Posted by danstelter

In terms of taxes - is it any better to get a check with no fees and get taxed, or does it just even out if I take a Paypal payment and take the fees?

Strictly in terms of taxes, it's better for you to avoid fees.

Each $1 in fees only saves 25-35 cents of taxes. So would you rather pay $1 to paypal? Or keep your $1 and only pay $0.30 to the IRS?? Obv it's better to avoid the fee (taxwise).

But in terms of making your customers happy with payment options, it may just have to be part of the business plan to accept those fees for the extra customers paypal brings. If you go to solely checks, you may also increase the expense from bounced checks. All things to consider


You might also find these IRS links helpful:
Deducting Business Expenses
http://www.irs.gov/pub/irs-pdf/p334.pdf

Are you an eBay seller?

I do some shopping on eBay (books, clothes, electronics, etc.) - and only use paypal. If a seller only accepts checks, I go to a different listing. I'm sure I'm not the only one who does that. So eliminating that payment option could be detrimental to your overall profit. Guess that will be a business decision you've gotta make.

[danstelter]

Thanks for the reply...very helpful! Yes...I have allowed people to pay however the want for convenience reasons. Sometimes, they don't care, and I'm not sure what to do. But, this helps! Thanks!