Not sure I totally understand your question, but only the standard notarization fee for your state is deductible FROM SE tax only. There is no ‘carryover’. For example, your state’s fee is $10/notarization; there were 8 notarizations in the pkg and the whole fee was $75–you can deduct the $75, but cannot ‘carryover’ the remaining $5 to the next job. Your signature on some page with no notarization does not count as deductible.
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Thank you, you did answer my question despite my explanation. Which means, if I get 100.00 and there are only 9 notary signatures, 10.00 remaining is taxable? So I have to track every notary signature in each loan document, correct?
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Do you have a preferred method?
Not sure if it’s per signature (like CA charges per sig.) or per Notarization, as my state does. I use a spreadsheet to track my work and simply have a column in it for # of N/job. Probably thousands of better ways to do it. Remember, it’s only deductible from Self-employment…whjch knocks down your taxable income. Also, be aware that it will also knock down your SS benefits in the future. Think about it.
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Exactly, thank you so much. LOL I was just getting ready to build my spreadsheet and started seeing software being promoted. I am so not there! Thanks again
IRC §61(a) defines gross income as “all income from whatever source derived”, unless specifically exempted or excluded.
Put simply: All income from signings, less expenses, are considered ‘taxable income’.
The frequent confusion is over self employment taxes.
Official notary fees (i.e.: the allowable charge per page/notary act, times the amount permitted by state law) are exempt for the purposes of self-employment taxes.
So, while total fees minus expenses are included in income (reported on Schedule C), self-employment tax is calculated on a lower amount (total fees minus - offical notary fees minus expenses), reported on Schedule SE.
Please also look at this NotaryCafe Forum conversation thread for a detailed discussion.
HWB.
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FYI, I put the number of notary acts (which is how my state limits official notary fees) in the margin of my notary journal, next to each entry.
For example, a loan package has 11 oaths/acknowledgements, per spouse (22 total), throughout 200 pages of documents, with a total charge of $100. Let’s assume there’s 20 miles of driving ($11.60) and $7.25 ink and paper (and no other expenses).
We’ll assume that’s the only assignment for the year.
So, you get:
$100 gross income (included in Schedule C - sales), minus
$11.60 mileage (included in Schedule C - transportation), minus
$7.25 mileage (included in Schedule C - office expense), which equals
$81.15 Schedule C business income, carried back to Form 1040.
Self employment taxes (Schedule SE) would be calculated based on the non-exempt amount, which is:
$81.15 Schedule C business income, minus
$44 public officer exemption (22 acts x $2 per act statutory ceiling in NY)m which equals
$37.15 reported on Schedule SE to determine self-employment tax
Expenses may include mileage (not just to signing, but also to scan and drop to FedEx/UPS), printing, paper, toner, notary license fee, insurance, NNA membership, testing, education and many other items, All the expenses would be consolidated and reported on Schedule C.
I hope this is useful.
HWB.
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Thank you for sharing the benefit of your experience, I have been a notary for many years but working for myself is new, I really want to be successful long term, I appreciate your help
Is your notary journal the only documentation you use for tax records to support the number of oaths/acknowledgements within a loan package?
yes. If the signers equal or greater to the cost in the state of Ca there isn’t any reported income. OK? I go out for a refi and charge 175 and have the husband and wife sign 6 docs each there isn’t any reportable income because I get 15 from the state as non reportable income… on each signature
I use notary Assist and deduct the cost of it on taxes along with cell, internet, paper, taxes and cost of home business IF its more than standard deduction…
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This only applies to Self-Employment Taxes (the equivalent to Social Security/Medicare deductions in a standard payroll situation) - Your fee is reportable as taxable income but your notary fees (in your case the $15/signature) are exempt from self-employment taxes only.
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I don’t really follow this. I won’t get into using a lower income for Social Security tax purposes, because I can’t do that in my state (we don’t have maximum fees).
But business income is calculated on Schedule C. Most business expenses are subtracted from gross income (line 7). Gross income on this form is the total amount paid by clients, plus perhaps a few other things that are not too likely for a notary. All legitimate business expenses are then subtracted to find the net profit (or loss) (line 31). This is then copied to Form 1040 line 3. You get to reduce your business income by these expenses whether you itemize deductions on Form 1040 or take the standard deduction.
As to whether you can count the things you listed as business expenses, that’s tricky. Paper: of course. Sales tax on paper: sure. Cell and internet? If you ONLY use them for notary work, OK. But if you use them for both personal and business use, I’d ask a tax professional. Taxes? Depends on which taxes. Home business? Don’t know what that means; do you mean home office? Home office is tricky. Notary Assist? yeah, that should be fine.
ALL notary income must be reported on your Schedule C Business Income form. Note that just because you CAN take the SE tax exemption, doesn’t necessarily mean you SHOULD. Doing so can impact your future Social Security and/or disability benefits. Talk to a CPA, EA, or other financial pro to determine the best approach for YOUR situation.
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You report all the income that is provided on the 1099s you receive from all your vendors.
Your mileage deduction is your best deduction.
Good luck
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You report all income you receive as a notary, regardless of whether you receive a 1099 or not. Not all hiring parties provide a 1099 as they may not be required to.
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Hiring parties who paid you less than $600 last year don’t have to send a 1099, but you have to report the income. You have to report the income, even if the hiring party should have sent a 1099 but didn’t. And (since every notary I’ve ever heard of uses the cash, not accrual, accounting method) you report what you actually received, not what is shown on the 1099.
The amount on the 1099 could be different from what you received. For example, you did a job in late November 2018, and the hiring party sent the payment in late December 2018. You received it in January 2019. So it would have been included in the 2018 1099, but you would not have reported it in your 2018 taxes; you’d report it in your 2019 taxes.
I’ve always received some income from parties who didn’t send a 1099, so my income has always been higher than the sum of all my 1099s.
Been a tax preparer for years. Started working on my enrolled agent status a couple of months ago.
I will tell you one thing. Find a professional who is knowledgeable in federal (& your states) tax code.
Laws are the standard. How they apply to & impact your circumstances can vary greatly.
I do not give advise on what a person should or should not do without a full view of their finances and circumstances. I have sat across from so many people who got themselves into or allowed someone to do their taxes that was chasing $$$ to get them into hellish trouble by ignorance or fraud.
Yes… there are lots of ins & outs being self employed. It may not benefit you in anyway to use some options. In some cases it may harm you. It all depends on your specifics.
Listen to the voices of reason here. Find experienced & reputable professionals for help.
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I’ll sum it up one last time. These are positions that I recommend to clients, and that I have used on my own returns,
I am an Enrolled Agent, focused on tax research, representation and litigation. There is reference to the law citations earlier in this thread; this has been exhaustively researched and supported by case law.
If one does not understand how this works, engaging an experienced and CREDENTIALED (EA, CPA, Attorney) professional is money well spent. The following applies to most situations.
- Notary income/expense is generally reported on its own Schedule ‘C’, using the taxpayers SSN or secondary EIN/TIN.
- Total notary revenue is reported as ‘gross sales’
- Transportation (including mileage/vehicle expenses), equipment (PC, printer, etc.), supplies (paper, toner, etc.), services (telephone, internet, insurance, etc.), fees (NNA, referral services, conferences, state registration, etc.) are deducted (or depreciated) in the appropriate category on Schedule C.
- Net business income/loss is combined with any other Schedules C, and reported on Schedule 1, Line 3 (before standard/itemized deduction is applied).
- When completing Schedule SE, an amount not to exceed the statutory maximum (maximum charge times number of notary acts) may be subtracted from net business income to calculate self employment tax, IF THESE NOTARIAL FEES AREN’T ALREADY ITEMIZED SEPARATELY. It is not mandatory to subtract these fees, just advantageous - most taxpayers will have reduced liability.
Please consult your tax advisor for further detail.
The information above applies to most taxpayers; I offer it, however, without warranty (hence the cites).
Importantly, the taxpayer themselves are always ultimately responsible for timely filing a correct return, and timely, full payment of tax liability; no research or advice can change that responsibility.
HWB.
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I use Notary Gadget for accounting. It does all the math for you for tax reporting. Only $99 a year. It’s worth it.
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