This will be my first year of filing tax return, Can someone help me to explain that what all rebate we can take out of signing fees ? I was told by some notary that Notary fees is tax free .
No...notary fees are not tax free....but the fees your state allows you to charge for notarizations is exempt from Self Employment Tax (the equivalent of your Social Security/Medicare Tax you'd pay if you worked for someone else)..
All of your income for notary work is subject to federal income tax.
Here's the link to the Internal Revenue section for Small Businesses. I'd say if in doubt and unsure how to do this, get a good certified tax preparer or Enrolled Agent to do your taxes. The fee you pay them will be worth avoiding any mistakes you may make to save a few dollars.
The amount you earn from a signing is where you start-
1. you deduct the number of signings times your state's allowance for each signature. That fee is Exempt from IRS.
2. You deduct you mileage getting to and from the signing and turning it into the carrier for a receipt.
3. Deduct any Tolls, parking fees,
The amount you have left is what you pay Self Employment Tax on. SE tax is how independent people earn towards retirement Social Security.
In California you will pay tax on your Notary income as they commission you and are due their share. You will only pay the % you pay for CA taxes.
Try to find a tax professional who is also a Notary to get all the right info.
So if I understand you correctly, if I sign 1000 loans in a year & CA allows $15 for each signature notarized, I’m only allowed to deduct $15,000 of my income?
You have to keep track of number of notarizations done - the $15/signature notarized is exempt from SELF EMPLOYMENT TAX only. It is still subject to Federal Income Tax.
Exempt only for Self Employment tax, the fee is taxable as ordinary income.
Notaries should not keep track in their Journal of anything but what they charge per signing.
A separate notebook or Excel Sheet should be kept so you know how many Notarizations you perform for each signing you are assigned. There are many good programs that can help track all the deductions such as mileage, parking, tolls, etc. I use NotaryAssist.
The Fees Paid - # of Notaries x $ - mileage - tolls - parking - etc. = Self Employment Tax you will need to pay to IRS.
Californians pay income tas on Notary income in their state income taxes.