How to Classify Outright PayPal Fees
PayPal offers a variety of payment processing services that can be used to process transactions, accept payments or transfer money for a fee. These fees need to be accounted for and recorded for tax purposes in most businesses and should be factored into the cost of products or services offered. Some fees get paid by the party that is initiating the transfer of money and others get paid by the party receiving money; some charges occur for monthly services, such as accepting credit cards. You can learn to classify the fees according to which activity they are based upon.
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Instructions
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Determine the exact nature of each individual PayPal fee on a transaction by transaction basis and group them together as processing fees or monthly subscription or feature fees.
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Total each group of fees and compare them to the statement on the PayPal account as well as the totals from your accounting system to ensure all fees are listed.
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Record the transaction fees as bank service charges, just like you would record a fee at an ATM machine for withdrawing cash or an ACH merchant fee from accepting a credit card.
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Record the recurring monthly fees as banking expenses, just like you would record a bank fee for overdraft protection.
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Tips & Warnings
Check with your accountant to ensure the fees being classified match the particular accounting system that is being used for your business.
Print a list of fees and transactions from PayPal on a regular basis to keep track of any fees and as a record of the expense. Save this record for at least 10 years in case of an audit.
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Resources
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