Even if you keep records of payments made by clients or advertisers during the year, it’s important to go over them again before tax time. You can check any 1099s received against your monthly records, but what about payments made through PayPal?
Whether you’ve been keeping financial records all year long or you’re putting together your records just in time for taxes, this post will help you limit your exported PayPal data to avoid duplicate entries. Also, learn how to deal with PayPal’s “Gross,” “Fee,” and “Net.”
How to Export Monthly PayPal Reports
I find that exporting each month separately keeps comparison from getting overwhelming. Also, I’ve had problems with not all the dates showing up on my PayPal reports. Limiting it to a month at a time keeps me in a range, plus I keep my monthly data in different sheets inside the same spreadsheet workbook. But you can export by the quarter, or even a whole year if you feel like it.
To download a PayPal report that you can open in Open Office Calc (free) or Microsoft Excel, hover over “History” in My Account and select “Download History” from the drop-down menu.
Select the dates and choose what type of report to export. While “All Activity” sounds safest, it’s actually full of duplicate content. Every invoice will be reported as “Paid,” but there will be a second entry for the payment itself. eChecks will show up twice as well, the first entry being for the date they were send and the second for the date they cleared.
To avoid confusion and duplicate entries you’ll have to delete, choose to export all completed payments. Excel and Calc will understand both Tab Delimited and Comma Delimited reports, even though they aren’t .xls or .ods documents. You can also choose to save your exports as a different format once you’ve opened them.
Understanding PayPal Gross, Fee, and Net
When comparing your records (or building them for the first time), be sure to use PayPal’s “Gross” amount, not the “Net.” If you reported the amount you actually received (Net) when creating the record, change it back to the Gross and make sure that you’ve used the same set of data across the board.
The fee PayPal charges for many transactions is a business expense, so be sure that your records contain a column for PayPal fees as well and add them all up. I keep all three columns—Gross, Fee, and Net—but I don’t use Net for my taxes.
Honestly, the end result will be the same whether you report your Gross earnings and then deduct the fee as part of your expenses calculation or you just report the Net. BUT, this method is more thorough and technically accurate.
Keeping good records makes tax time far easier. Going through your records with copies of your monthly PayPal exports gives you accurate records and peace of mind.
If you’re a blogger trying factor a variety of income into your taxes, check out my post on taxes for bloggers.
As always, I am NOT a tax professional. I have a few things to say on organization and double-checking your records, but I cannot guaranteee anything which may be interpreted as tax advice.