I have a service in which I simply am the middleman for my client so that they don't have to deal with certain technical aspects.
So payment goes as such:
I get paid for the service > I pay the person who delivers the service > I deliver completed service to client.
I don't profit much on this as it's just a simple service charge to alleviate some stress and time from already busy business owners. I'm worried that I might lose money due to taxes or that in the future - if I don't file things correctly I could face issues with the IRS.
I charge the client $600 and pay the worker $500. I make $100.
If I'm taxed based on the $600 then I lose money. I assume I only pay taxes on the $100 net profit.
(While I've been a freelancer for half a decade - I've never done anything except straight client work so I'm new to this)
If I pay taxes on the $100 like I think I do, no big deal.
However, my invoices to show my income will show that the client paid me $600.
Is it as simple as:
When I pay the worker $500 I attach their invoice to my invoice to show that I made $600 but paid $500?
Afterwhich I put X% of the $100 into my tax account.