How to Account for PayPal Fees on Schedule C

For a fee, PayPal processes online payments for businesses.

Report business income and expenses to the Internal Revenue Service on Schedule C. Use the first part of the form to list your gross receipts. Parts two to five pertain to everything you paid in order to keep the business running. Expenses such as office equipment and supplies, mileage, repairs and maintenance, for example, offset your earnings and might reduce your tax liability. If you paid PayPal the previous year to process payments for goods or services you provided through your company, include the service fees in Schedule C.

Instructions

1. Total all the business-related fees you paid PayPal during the tax year for which you are preparing the Schedule C.

2. Type the total PayPal fees in Part V of Schedule C under "Other Expenses." Describe the expense as PayPal service charges.

3. Add all the separate expenses you listed in Part V of Schedule C. Write the total on lines 48 and 27 of the form.

4. Deduct your total business expenses from your total business earnings. Write the profit or loss on line 29 of Schedule C. Use that information to complete IRS form 1040.

References

• IRS.gov: 2010 Instructions for Schedule C--Profit or Loss from Business

Resources

• IRS.gov: Schedule C (Form 1040)--Profit or Loss from Business