How to mark fees that I pay on behalf of my client?

I am a sole owner LLC that helps clients, usually commercial real estate firms, form their entities and pay annual secretary of state fees directly to the states they are formed in (usually Delaware). For example, I will form an entity for a client and the fee is $100. I will pay the fee for them and then invoice them $100 plus $50 for my service fee. But I also sometimes invoice and get paid in advance...a $300 annual fee is due so I will invoice them for the $300 and my $25 service fee and they pay me in advance and then I pay the state. What I have been doing (for both scenarios) is marking that $100 or the $300 just as a 'statutory expense' for my accounting purposes...but is that accurate? As my business has grown, the total 'revenue' has increased dramatically and I don't want to push myself into a higher tax bracket because I am not reporting it correctly. Any insight is appreciated!

2879

Intuit Alumni

Jun 1, 2019 8:06:43 AM

You would report the entire fee received as income and then report the fees you paid to the states as an expense under either Tax and Licenses or Miscellaneous Expenses.

To do this in TurboTax, please follow these steps:

Click on Income and Expenses and then click the Start/Revisit box in the Self-Employment section.
On the Your 2017 self-employed work summary screen, click on Edit next to your business. [See Screenshot #1, below.]
On the Here's your [business] info screen, click on the box Add expenses for this work. [Screenshot #2]
On the Tell us about any expenses screen, scroll down through the categories. Mark the button next to Taxes and Licenses and click the Continue button at the bottom of the screen.

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How to mark fees that I pay on behalf of my client?