Author Topic: Tax Deductions for Transaction Fees?  (Read 503 times)  

Offline AlexisR

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Tax Deductions for Transaction Fees?
« on: January 11, 2018, 02:07:19 PM »
It's tax season! Hooray. :P

In doing some research, this article claims you can deduct transaction fees related to your sales (https://www.tckpublishing.com/20-tax-deductions-for-writers/).

15. Transaction Fees: So you know how PayPal takes a slice of every sale? And how Amazon deducts transaction and sale fees? Guess what? Deductible! Just keep track of the amount thats being taken out of your list price and you can add it up on your tax return at the end of the year.

Does this mean that Amazon's royalty fee is deductible? Printing costs for KDP/Createspace books? Whispernet delivery fees? It seems kind of crazy if one really could deduct $2-$3 on every print book they sell (printing costs), or $1 for each digital sale (Amazon royalty).

Anyone who's been around the block a few times have some perspective on this for me? Thanks!

Online LilyBLily

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Re: Tax Deductions for Transaction Fees?
« Reply #1 on: January 11, 2018, 02:29:04 PM »
I think you may be mistaken, so don't celebrate in a big way yet. The basic idea of a business deduction is something you had to pay for in order to produce income.

Do you pay transaction fees? Then they're likely to be deductible. Do others pay them? Then, no, not your deduction. Example: You buy a product or service on Fiverr. In addition to the $5 or whatever, you also are charged a currency conversion fee. That is part of your expense so you add it to the cost of your Fiverr purchase and deduct it all. Second example: You pay for a service via PayPal. You aren't charged a transaction fee; the other person gets charged the fee. So you can't deduct it.

Amazon typically sends a 1099 showing the dollar amount they remitted to you. That's your gross taxable income for those sales. If Amazon were to send you a 1099 showing the list price per book of each sale, not the amount it actually paid you, then you'd be within your rights to claim all the costs Amazon takes against the list price as deductions. But Amazon doesn't do that, so you can't, either.

You can deduct the costs of sales only if you pay the costs of sales. That's not tax advice; that's logic.


Offline AlexisR

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Re: Tax Deductions for Transaction Fees?
« Reply #2 on: January 11, 2018, 04:19:49 PM »
Okay, that makes sense. Obviously I just need to go find an accountant since this is not my strong suit.

The joys of being indie and figuring it all out on your own. :)

Offline NAKBaldron

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Re: Tax Deductions for Transaction Fees?
« Reply #3 on: January 11, 2018, 04:26:07 PM »
Okay, that makes sense. Obviously I just need to go find an accountant since this is not my strong suit.

The joys of being indie and figuring it all out on your own. :)

I've ran several small businesses over the past ten year, and I'll say the best advice is get an accountant. They're worth every dollar! It's common wisdom around here not to skimp on cover designers and editors, but I think accountants should get added to that list of must have members of your author/publishing team.


Offline C. Gockel

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Re: Tax Deductions for Transaction Fees?
« Reply #4 on: January 11, 2018, 04:42:12 PM »
I've ran several small businesses over the past ten year, and I'll say the best advice is get an accountant. They're worth every dollar! It's common wisdom around here not to skimp on cover designers and editors, but I think accountants should get added to that list of must have members of your author/publishing team.

I'll second this. Especially when you have a business, a job, a house, kids ... it gets very complicated. At least, in the U.S. ...


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Offline NAKBaldron

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Re: Tax Deductions for Transaction Fees?
« Reply #5 on: January 11, 2018, 05:22:16 PM »
I'll second this. Especially when you have a business, a job, a house, kids ... it gets very complicated. At least, in the U.S. ...

Good point. My experience is strictly limited to Texas in the US. Hell yeah to kids. After my daughter was born there is a clear decline in my book keeping skills, because something had to give. (I also don't remember the last time my house was clean)


Offline Wayne Stinnett

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Re: Tax Deductions for Transaction Fees?
« Reply #6 on: January 11, 2018, 06:32:59 PM »
If you sell stuff through Paypal, their fees are deductible. For instance, I sell signed paperbacks on my website at $14.99, including shipping. Paypal keeps $.73 of that, which is a valid and normal business expense.

Your 1099 from Amazon reflect your gross earnings and don't include their share or delivery cost. So, how can you deduct an expense from your gross if your gross doesn't include it. So, no, not deductible.
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Offline Speaker-To-Animals

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Re: Tax Deductions for Transaction Fees?
« Reply #7 on: January 11, 2018, 08:46:11 PM »
On Amazon transactions fees, that article is just plain wrong. It's not confusing. It's not poorly stating something. It's not advocating something that is a questionable interpretation of the tax code. It's wrong.

Deduction is the wrong word. It's a business expense. Profit, not revenue, is what you're taxed on. Profit = Revenue - Expenses. So if you pay for something, that's an expense. If you don't pay for it, then it's not an expense. When you sell something through Amazon, the royalty and fee and printing cost are taken prior to you receiving your royalty check/deposit. You don't pay it as an expense, you simply never receive it and the 1099 doesn't include it.

Offline The Fussy Librarian

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Re: Tax Deductions for Transaction Fees?
« Reply #8 on: January 13, 2018, 09:14:35 AM »
I will add my two cents about the value of a real accountant. Not a tax preparer. (I'm sure some of them are quite good but it's a crap shoot.)

A real CPA is worth his or her weight in gold.

And yes, PayPal fees are a business expense and reduce your taxable income.

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Offline notjohn

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Re: Tax Deductions for Transaction Fees?
« Reply #9 on: January 13, 2018, 01:04:47 PM »
Quote
15. Transaction Fees: So you know how PayPal takes a slice of every sale? And how Amazon deducts transaction and sale fees? Guess what? Deductible!

Good heavens, no! You don't concern yourself with gross income or transaction fees; you just report the net from each sale. (I'm assuming here that you are selling actual items and not using PayPal to receive income from Lulu or Streetlib or such, in which case it's they who are paying the transaction fee. They send you a 1099-MISC in February/March; PayPal really doesn't come into it at all, any more than your bank does when it receives an EFT from Amazon or D2D or Google.)

I think it's ridiculous to hire an accountant. You're smart enough to write a book but not to fill out a 1040? Taxes aren't rocket science. For years I got by with J K Lasser's annual tax guide -- does that still exist? Then I discovered TurboTax, which does all the math. I buy Basic for $30 (some years it was $20); it has all the forms, so if you're happy entering information directly on the forms, it's all you need. As for J K Lasser, I now download PDFs as I need them for free from the IRS site.

The only people who truly need help are people on ObamaCare. I have never seen anything so baffling as the health care forms thrown up by that misbegotten legislation. The individuals least likely to be able to cope with red tape are the ones most snared in it. (Even TurboTax, in the first year of the ACA, didn't get it right.)
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Online RobMartin

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Re: Tax Deductions for Transaction Fees?
« Reply #10 on: January 13, 2018, 03:52:50 PM »
On Amazon transactions fees, that article is just plain wrong. It's not confusing. It's not poorly stating something. It's not advocating something that is a questionable interpretation of the tax code. It's wrong.

Deduction is the wrong word. It's a business expense. Profit, not revenue, is what you're taxed on. Profit = Revenue - Expenses. So if you pay for something, that's an expense. If you don't pay for it, then it's not an expense. When you sell something through Amazon, the royalty and fee and printing cost are taken prior to you receiving your royalty check/deposit. You don't pay it as an expense, you simply never receive it and the 1099 doesn't include it.

^This. I work as a tax accountant in a CPA office (US. I"m not an expert in foreign tax structures). When you get the 1099, that's your revenue. From that, you deduct expenses which may include transaction fees that you paid to arrive at profit.  There's a lot of variables in taking expenses, but it amounts to what you paid. If you're not sure what constitutes a legitimate business expense, please see an accountant. Too many of our clients come to us with problems caused by missinformation or believeing they have a complete understanding of the US tax code.

Online LilyBLily

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Re: Tax Deductions for Transaction Fees?
« Reply #11 on: January 13, 2018, 07:38:22 PM »
IRS.gov has all the information a U.S. citizen needs. It just takes a lot of reading and rereading to understand it. But we're authors. We love to read, right?