Hello! I was wondering if we pay taxes on 100% of the earnings or if we pay based on the amount left over after the site takes it's cut, so 85%? I appreciate the help. Thank you!
I would suggest that you consult an accountant.
I’m a self-employed massage therapist and have to itemize taxes. I’m not sure exactly how you guys do things but I’ll tell you what I know from my own experience:
If you are paid the full amount by the client and then you turn around and pay the site their percentage, the cleanest way to do it is to report what you are paid as income and then report the percentage you pay to the site as an expense. You will then be taxed on your net, which is what is left over after you deduct your expenses. If you are charged any fees by a credit card company then they would also be deducted as an expense.
If the full amount is paid to the site and then you are paid that amount minus the site’s percentage, since that lesser amount (85%) is what you receive then you would report that amount and pay taxes on that amount.
In the end it comes up the same but the bookkeeping is done a little differently. It’s tracking what route the money takes.
You will have to pay self-employment tax. I strongly urge you to find an accountant who works with self-employed individuals and very small businesses. They can show you how to set up your bookkeeping and inform you about what you need to know.
@leona3981 I agree with what @Babichev recommends.
Pros here are a business, providing services that have a charge and customers that pay that charge.
I have been a business owner for 30 years. A great accountant is wonderful. Our tax code here is 80,000 plus pages. And its loaded with "goodies"! There are all kinds of tax deductions that you incur running your business here. Consult that accountant!
(side note...credit cards are a great way to simplify your tax keeping as your monthly statements works as a record, much better than tons of cash receipts. Plus you get rewards from credit cards---see free Vegas trips 🤣)
Documenting those tax deductions will lower your tax liability 👍