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A portion of my income, in Canada, is derived from contracts through the freelancing website oDesk. For their trouble, oDesk skims 10% off the top of what the end client is charged and forwards the rest on to me. As I also have income that doesn't derive from oDesk, I use accounting software (FreshBooks) to track everything relating to my freelancing. When entering my oDesk work on FreshBooks, there are two possibilities:

  1. Create an invoice for the full amount billed to the client by oDesk, and record the 10% commission as an expense against that invoice
  2. Create an invoice for the full amount paid to me by oDesk

Which method is most advantageous from a tax perspective? To me, it boils down to whether Canada Revenue Agency allows me to deduct that commission I pay as an expense; their website has much about deducting expenses for employees earning commission, but nothing that I could find on self-employed people who pay commissions to earn income.

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Personally, I would use the rate I am paid. If I charge $100/hr, and through a service like oDesk, I'm paid $90/hr, I'd report as $90/hour. They are not taking off taxes, so I don't say I made $100/hr. They are an expense from before you get your gross income. The CRA will care more for the money you are actively making, as oDesk has their own tax implications (taking commission off the top).

Quoting the CRA:

There are expenses you can incur to earn income, other than those listed on Form T2125, Statement of Business or Professional Activities. Enter, on this line the total of other expenses you incurred to earn income, as long as you did not include them on a previous line. You do not have to list these expenses on the form.

More info from the CRA, including what is allowable expenses. Because it does not cost you, you don't include it as an expense in your taxes. Claim the $90/hr wage.

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