Service Fee Taken Out of Paycheck Before Deposited--How to Account in YNAB?

I use Upwork to get paid from clients since I freelance. Upwork takes out their service fee before paying me and putting the money in my checking account. Is there a way to account for this in YNAB? Upwork is not an institution I can link into my accounts.

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  • Is there a reason you’re budgeting gross income (or partial gross?) instead of net income?

     

    If I were in your shoes I would only budget the net paycheck you receive. If you’re set on accounting for it you could set up an ‘Upwork Service Fee’ Payee and budget your gross paycheck and then an outflow to the service fee payee. 

    Like 1
    • Slate Gray Inspector Upwork takes the service fee out Before. I get paid, so I only get the net amount. I want to see my gross amount for taxes and to accurately reflect in my service fee category. Maybe I don’t need to show that since it happened outside of bank transactions. 

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  • I would make the entry for pay the actual net amount and then do split transaction (income $x.xx  Bank fees -X.XX).

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    • MXMOM Upwork takes the service fee out Before. I get paid, so I only get the net amount. The amount is already split by the time it shows up in bank transactions. 

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      • MXMOM
      • MXMOM
      • 1 mth ago
      • Reported - view

      Lavender Jackal ok so this is what I am understanding. Your pay is $1200. Upwork takes a $200 fee and $1000 gets deposited in your account. Is that correct?  If so then exactly what dakinemaui posted is correct. That would reflect the amount deposited, show the amount you earned and showed the fee Expense. You could also do a split transaction with both categories being To be Budgeted and having up work as the payee for the fee deduction. It depends on what you want to see. 

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  • Reflect the reality of what happened. For example,  you received $1200 "income" (before the fee) and were charged a $200 fee. Enter a split transaction in your checking account:

    • Net: $1000 (what actually hits the account)
    • Split 1: $1200 inflow categorized as Inflow:To Be Budgeted
    • Split 2: $200 outflow categorized as Upwork Fee

    You should immediately budget $200 of your income toward the Upwork payment.

    ---

    That all being said, most would simply track the net income in YNAB and rely on a statement from Upwork for the gross at tax time. It's just simpler and less prone to mistakes.

    Like 2
      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 mth ago
      • 2
      • Reported - view

      dakinemaui 

      dakinemaui said:
      That all being said, most would simply track the net income in YNAB and rely on a statement from Upwork for the gross at tax time. It's just simpler and less prone to mistakes.

       If you are using YNAB for your aggregate reporting then it's important for the reports to be accurate. Especially if your income comes in from multiple sources, it would be a little more than slightly annoying to have to filter out income that came from one source, just to add it back in and add an expense line for service fees (or merge in those fees with an existing line.

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    • dakinemaui Are you saying I should manually enter in these transactions? The service fee isn’t reflected on the bank statement since it happens before I get the money. 

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    • nolesrule What do you recommend?

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    • Lavender Jackal If you want to track gross pay and the service fee, then yes you will have to enter the transactions yourself. (Import will match it.) The scheduler somewhat reduces the entry effort, but it won't be totally automatic if the amount changes.

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    • dakinemaui Do you recommend I create an Upwork account to manually record these within?

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      • MXMOM
      • MXMOM
      • 1 mth ago
      • Reported - view

      Lavender Jackal I actually manually enter every transaction. I do schedule ones that are repeats and If the amount is different then I edit that transaction. 

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    • Lavender Jackal No, the split transaction I described should be entered in your checking account, assuming that is where that money is deposited.

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    • dakinemaui So change the amount deposited then, from say $75 to the full $100, then allocate $25 to service fee?

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    • Lavender Jackal The "Net" or top line of the split transaction should match what hits the account in the real world. The split line that is categorized as TBB is the net plus the service fee. One (split) transaction.

      Separately, you need to budget for the service fee (in the budget screen).

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    • dakinemaui right. So I will have to either change the transaction amount that comes in (because that amount does not include the service fee since it was already taken out), or include a new Upwork account that shows the service fee amount only. 

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      • dakinemaui
      • dakinemaui
      • 1 mth ago
      • 1
      • Reported - view

      Lavender Jackal 

      Lavender Jackal said:
      I will have to either change the transaction amount that comes in (because that amount does not include the service fee since it was already taken out)

      No, the amount that comes in is what it is. That happened in the real world. That is the amount that needs to be in the top line of the split transaction in your checking account, otherwise YNAB doesn't agree with your bank. Are you familiar with split transactions

      As part of the categorization, you will enter the gross (inflow) and the service fee (outflow) on separate split lines. Ideally, you enter the entire split transaction before you import, but if you don't, then yes, you'll have to edit that imported transaction to add these categorization details -- leaving the top-line (net) the same.

      dakinemaui said:
      Net: $1000 (what actually hits the account)
      Split 1: $1200 inflow categorized as Inflow:To Be Budgeted
      Split 2: $200 outflow categorized as Upwork Fee
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    • Lavender Jackal And in case a visual helps...

      Like 4
      • MXMOM
      • MXMOM
      • 1 mth ago
      • Reported - view

      Lavender Jackal exactly what Matthew is showing. The only thing I will add is that if you don't need/want a separate category for the Upworks fee (and that depends on how you want to see everything in a report later on), you could also make the Upwork fee category To Be Budgeted and put Upworks as the Payee (see the first field in the pic Matt has.  This would eliminate the need to budget or think about the fee separately but will still give you the ability to pull it out later for taxes etc. I personally use this to keep things simpler.  

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      • MXMOM
      • MXMOM
      • 1 mth ago
      • Reported - view

      MXMOM Here is what this would like like in the reports.  And all your transactions can be dumped to Excel later if you need to do tax reporting.  If that's the case, I recommend putting the word tax (or if you want #taxes) and then you can find all the tax related transactions later.  

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 mth ago
      • 2
      • Reported - view

      MXMOM Upworks should appear in the Expenses section, not Income.

      For business reporting, Upworks fees are a business expense and should appear correctly.

      Like 2
    • dakinemaui Thank you for writing that out. I get what you're saying now.

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    • Matthew Thanks for the visual. :)

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  • Lavender Jackal said:
    include a new Upwork account that shows the service fee amount only. 

     Just a note to say that in YNAB an account is a physical place where money is (or loans). For example a bank account, a credit card account.   

    WHAT the expense is uses a category. 

    I am just detailing this because it gets confusing when trying to get answers if someone uses terms we aren't familiar with or have a different understanding.  I am an accountant so I get where you are using account but in YNAB that is incorrect.

    Like 2
      • dakinemaui
      • dakinemaui
      • 1 mth ago
      • 1
      • Reported - view

      MXMOM I took the "include a new Upwork account" to actually mean a YNAB account. In that account, OP would record the full salary categorized as TBB, then enter a separate outflow transaction categorized to a Fee category. Then make a transfer from the Upwork account into checking.

      While that would work, it's far more complicated than a simple split transaction.

      Like 1
  • Thank you all for helping me sort this out!

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  • 1 mth agoLast active
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