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Accounting for Service Fees

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As you know I am laser focused on building my virtual assistant consulting business. Today I am here with a question for the BAD community about the service fees I incur.

Little Background

When I began twelve years ago, I was able to build my business using to primary methods.

First, I advertised in local business focused magazines and newspapers. My first client found me through a newspaper that came to his wife’s law office. He ended up hiring me as customer service for one company and tech support for another.

Second, I applied for project based jobs on Guru.com. This is how my longest running client found me. I started as a part time marketing assistant and moved up to customer service and product manager over 10 years with them.

guru logo

Now Today

I thought as I began to focus on rebuilding my consulting business that I could go about things in a similar manner. But time has changed things a bit. Virtual Assistant is now a common term. And I am competing with a worldwide workforce.

Tim Ferris’ book Four Hour Work Week brought using an international workforce to the forefront. Highlighting the opportunity to hire a quality, low cost support staff. It made competition in the virtual assistant world fierce.

My Question: Service Fees

As a result of all of this, I am changing direction. Or at least the platform and proposals I am using.

I am now focusing on Upwork.com and taking advantage of their detailed filter options for finding work. I specifically like the option to limit your search results to projects seeking US Based Workers only. This is huge for my particular industry.

upwork logo
In addition to the standard price, time frame and keywords, you can limit search results by skill level sought and number of proposals already submitted and more.

Here’s my question: each of these platforms charges a service fee to the contractor.

The service fee comes out of the contractors pay depending on what level of membership the contractor has. I am charged 8.95% of any pay on Guru and 20% for the first $500 earned per client and 10% up to $10,000 with a client on Upwork.

How do you account for the service fee when it comes to tax time?

 


2 Comments

  • Reply JayP |

    Interesting. I would think they would just 1099 you on the net amount. Then just claim that amount as income. If they 1099 you on the gross then deduct as a business expense.

  • Reply angie |

    I agree. They will either pay you less off the bat on the 1099 or deduct it. Are you adding this 10-20% into the rate you are charging? The 15$-20$ an hour you proposed a few posts ago is quickly dwindling….

So, what do you think ?