When you receive money as a freelancer, there is a good chance that you will have to pay a fee. Many payment processors charge fees for you to receive money. As a result, you can see how your real earnings can be affected by these fees.
If you notice that payment fees are cutting into your earnings, here are some things you can’t consider when it comes to invoicing, payments, and taking care of those fees.
Payment Fees are Tax Deductible
One of the first things to understand as a freelancer is that your payment fees are tax deductible. Any money that you pay for an invoicing program is also tax-deductible.
While a tax deduction isn’t a dollar for dollar benefit on your taxes, it can still be useful in reducing your business income. Whenever you pay fees make sure to keep a record so that you can benefit from the deduction.
It’s Better to Avoid Payment Fees
Of course, even though you can receive a tax deduction for your payment fees, it’s better to not have to pay them in the first place. Whenever possible, look for ways to avoid payment fees.
Another way to avoid payment fees is to see if your clients will pay through bank transfer. This type of arrangement requires that you provide your client with your bank account information. This method works well with larger corporate clients. I like to give my business account information to clients who pay this way. I don’t have to wait for a transfer from PayPal and I don’t have to worry about fees but not every client can do this.
You can also avoid payment of fees when you accept checks. However, you have to be willing to wait for the check to arrive. It can also be inconvenient if you have to take a check to the bank. When I receive checks, I usually use the bank’s check deposit app so I don’t have to go into the bank physically.
Credit Card Processing Fees
Some invoicing programs allow you to access Credit cards. These transactions come up with their own fees. You need to be ready for these fees. Some processors like PayPal Will take your credit card for you but you may not get a special transaction fee when your clients use credit cards.
Before you set up a separate merchant account for your own credit cards see if you can get the same benefit using a third party. It might cost a little less overall and it is likely to be less of a hassle.
Whatever you decide to do there is a good chance that you will have payment fees at some point. Research your options, pay attention to what is tax-deductible, and do your best to save money.