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The 12 pdfs are equally annoying to freelancers. I think what hurts here are how the fees are structured. If I charge client $100, the invoice will show this n

The 12 pdfs are equally annoying to freelancers. I think what hurts here are how the fees are structured. If I charge client $100, the invoice will show this number. This will also be the income I’ll be reporting to tax authorities, so I have to pay income tax on $100, and an Upwork fee will be automatically deducted. I don’t know if they would have a legal way to do this but I would much rather my invoice showed $90 in this case since I never even had the chance to see the full $100.

gamblor956 3y ago
The Upwork fee is reported as a business deduction on your tax return. As an independent contractor you pay income taxes based on your self-employment net income (not your gross income, as employees are) because you are effectively treated as a type of business for income tax purposes.
- szundi 3y ago
  There are almost no forms of tax that are significant in size and based on gross revenues at the same time.
  - rdl 3y ago
    Washington State has a B&O tax which, until recently, was the primary state tax. Hawaii has a ~4% gross receipts tax but it can be visibly passed on to customers like a sales tax.
  - pcthrowaway 3y ago
    I realize this doesn't apply to Upwork, but don't the new U.S. tax laws discussed in https://news.ycombinator.com/item?id=35614313 https://news.ycombinator.com/item?id=35614313 prevent companies from writing off development costs, meaning they are taxed on the gross revenues (at least for that year)
    - gamblor956 3y ago
      No, they have to capitalize (or amortize) development expenses over a 5 (domestic R&D) or 15 year (foreign R&D) period instead of getting to deduct them currently (meaning in the year incurred). Due to the way depreciation works, development is treated as incurred mid-year regardless of when in the taxpayer's tax year they are actually incurred, so the ultimate effect is that only 10% of the development costs can be deducted in the first year, 20% for the next 4 years, and 10% in the final year (6th calendar year after incurring cost, due to the deemed mid-year start in the first year).
  - gamblor956 3y ago
    San Francisco has a gross revenue tax that is significant for tech companies. Hawaii also has a general excise tax based on gross retail and/or service revenues and is the state's primary tax on businesses (in lieu of income taxes). Ohio's commercial activity tax is based on gross revenue above a threshold. Oregon's corporate activity tax is based on gross revenue above a threshold. Washington's B&O tax is based on gross revenue and is the state's primary tax on businesses (in lieu of income taxes). France's social contribution tax is based on gross revenues above a threshold. And those are just the ones I know off the top of my head because I deal with them regularly.
- strobe 3y ago
  it's really depends on the country laws and legal entity type, in some cases you must report gross income and all platforms fees can't be considered as expenses.
csunbird 3y ago
Not a tax advisor, but you probably need to show that you paid Upwork 10$ as commission and get a business expense deduction.
- msadowski 3y ago
  In some countries not necessarily. I’m based in Czech Republic and as a sole proprietor the most preferential way to do taxes (up to certain threshold) is to report the gross income and use a tax rule that assumes that it cost you 60% of gross revenue to get your income. In this case the lower income shown the better.
  - stevesimmons 3y ago
    So you've spent 10% and are 50% up. Isn't that already advantageous enough for you? Taxes fund a civilised and (mostly) well run society that you benefit from. Misreporting your gross income shifts more of that burden onto your friends and neighbours!

gamblor956 3y ago

The Upwork fee is reported as a business deduction on your tax return. As an independent contractor you pay income taxes based on your self-employment net income (not your gross income, as employees are) because you are effectively treated as a type of business for income tax purposes.

szundi 3y ago
There are almost no forms of tax that are significant in size and based on gross revenues at the same time.
- rdl 3y ago
  Washington State has a B&O tax which, until recently, was the primary state tax. Hawaii has a ~4% gross receipts tax but it can be visibly passed on to customers like a sales tax.
- pcthrowaway 3y ago
  I realize this doesn't apply to Upwork, but don't the new U.S. tax laws discussed in https://news.ycombinator.com/item?id=35614313 https://news.ycombinator.com/item?id=35614313 prevent companies from writing off development costs, meaning they are taxed on the gross revenues (at least for that year)
  - gamblor956 3y ago
    No, they have to capitalize (or amortize) development expenses over a 5 (domestic R&D) or 15 year (foreign R&D) period instead of getting to deduct them currently (meaning in the year incurred). Due to the way depreciation works, development is treated as incurred mid-year regardless of when in the taxpayer's tax year they are actually incurred, so the ultimate effect is that only 10% of the development costs can be deducted in the first year, 20% for the next 4 years, and 10% in the final year (6th calendar year after incurring cost, due to the deemed mid-year start in the first year).
- gamblor956 3y ago
  San Francisco has a gross revenue tax that is significant for tech companies. Hawaii also has a general excise tax based on gross retail and/or service revenues and is the state's primary tax on businesses (in lieu of income taxes). Ohio's commercial activity tax is based on gross revenue above a threshold. Oregon's corporate activity tax is based on gross revenue above a threshold. Washington's B&O tax is based on gross revenue and is the state's primary tax on businesses (in lieu of income taxes). France's social contribution tax is based on gross revenues above a threshold. And those are just the ones I know off the top of my head because I deal with them regularly.
strobe 3y ago
it's really depends on the country laws and legal entity type, in some cases you must report gross income and all platforms fees can't be considered as expenses.

csunbird 3y ago

Not a tax advisor, but you probably need to show that you paid Upwork 10$ as commission and get a business expense deduction.

msadowski 3y ago
In some countries not necessarily. I’m based in Czech Republic and as a sole proprietor the most preferential way to do taxes (up to certain threshold) is to report the gross income and use a tax rule that assumes that it cost you 60% of gross revenue to get your income. In this case the lower income shown the better.
- stevesimmons 3y ago
  So you've spent 10% and are 50% up. Isn't that already advantageous enough for you? Taxes fund a civilised and (mostly) well run society that you benefit from. Misreporting your gross income shifts more of that burden onto your friends and neighbours!