Fees--What the Notary May Charge, How, Reporting

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Understanding Notary Fees
ASN Hot Tip, March 2009-#2

The Situation:  Some Notaries provide services that, in addition to authorized notarial acts, include other non-notarial aspects of the job assignment. Or, a notary can incur expenses associated with performing a notarial act. When invoicing a client for notarial services, the notary would like to invoice for any other charges and expenses as well.

The Notary’s Dilemma:  How does a notary present both notary fees and other charges or expenses to a client so the client understands that the entire charge is not solely for the performance of a notarial act? Our notary wants to avoid a misunderstanding that could result in a complaint to her commissioning authority alleging that she overcharged the client for performing a notarial act.

The Solution:  The first thing you will need to know is the maximum fee that your commissioning state allows for each notarial act that you are permitted by law to perform. That information is contained on our website, www.asnnotary.org. Click on the “Notary Information by State” link, and a U.S. map will come up. Then click on your state and you will be taken to information specific to notaries in your state. Scroll down to “Fees to Charge” to see the maximum fees that your state allows you to charge for each notarial act that you are authorized to perform.

PLEASE NOTE:  ALWAYS discuss your fees with the client before you perform any service. It is unwise and could be seen as unethical for you to wait to tell your client about your fees until after your services are performed. Always give clients the chance, up front, to accept or decline your fees.

ADDITIONAL FEES—Fees for additional services not related to the notarial act and the expenses that you incur in order to perform the notarial act may be charged to the client if he or she has agreed to them. The easiest way to clarify the different fees for the client is to provide him with an invoice. At any office supply store, you can purchase a pad of invoices that automatically makes a copy for your records when you create the invoice for the client (carbon-copy or no-carbon-required pads).

On the invoice that you write out for your client, line-item each charge and expense along with each fee for performing a notarial act. Clearly state what each charge, expense and notary fee is for and the amount that you are charging for each item. If your first contact with the client is by phone, provide the same information to him that you will write on the invoice to present to him in person and have him agree to the charges before you provide services as a notary. When you present your invoice to the client, you may wish to have him sign it to show that he agrees with the charges and understands the purpose of each line-itemed charge.
 
USE OF YOUR JOURNAL/RECORDBOOK—You can also keep track of your notary fees through the use of a journal or recordbook. Each entry for the performance of a notarial act has a space for you to record your notary fee for that notarial act. A recordbook is a great tool for adding up the total amount of your fees for notarial services at the end of the year, so you may accurately report your notary income to the IRS.

INVOICE SAMPLE—The following is a sample of an invoice presented to the father of the bride for a wedding ceremony to be performed in June 2010 by a Florida notary public. (Only Florida, South Carolina and Maine permit notaries to solemnize marriages.)

IMPORTANT:  ASN does NOT suggest or warrant that the non-notarial fees shown below are typical… these figures are shown ONLY so we may illustrate how to create a line-itemed invoice!

Jean Thomas, Wedding Planner and Florida Notary Invoice

Wedding of Mary Smith & James Jones–Taking place June 1, 2010.

Reserving sites of wedding ceremony and reception:...........$100.00

Hotel site planning for reception:
            Reserving rooms for guests...................................$50.00
            Coordinating food and beverage.............................$150.00
            Decorating banquet room for reception...................$300.00

Travel to site of ceremony on date of wedding.....................$50.00

Solemnizing marriage as a notary public............................$30.00  
                                                                                    
                                                                        Total:     $680.00

As you can see, Jean Thomas offered services to the bride and groom other than performing the marriage ceremony. She carefully line-itemed each fee and expense so there would be no confusion as to what each charge in the invoice was for. It is clear that, although Jean charged the maximum that Florida law allows for performing the marriage ceremony, she did not overcharge for her work as a notary.

If your client is not sure how much you charged for the notarization and how much you charged for the other services you may have provided or expenses you incurred, he may come to think that you overcharged for the notarial act that you performed for him and file a complaint with your commissioning authority. Avoid these unnecessary complaints by communicating the amount of your fees and expenses to the client both verbally and with a line-itemed invoice.

 Questions, comments on this Hot Tip? Email Kathleen@asnnotary.org

 
Tax Time
ASN Hot Tip, February 2008-#1

PLEASE NOTE: The following information is meant to raise your awareness of self-employment tax issues. It is NOT to be taken as expert advice on taxes or tax matters. Please be sure to consult a tax expert if you have questions or concerns about your taxes.

A notary who works for himself as a mobile notary and/or witness-only loan closer pays self-employment tax on his earnings in somewhat the same way that an employer pays social security and Medicare tax for an employee, with one major exception. A self-employed notary does not have to pay self-employment tax on income derived from fees charged for actual notarial acts.

This elective exemption applies ONLY to the portion of a notary's income that comes from the fees charged for actual notarial acts. Additional fees (travel, photocopying costs, etc.) must be accounted-for separately, and are taxable without exception.

For example, a notary working as a witness-only loan closer might charge a total of $125 for a particular closing. There were seven notarial acts required for this closing. This notary resides in a state that permits its notaries to charge up to $10 per notarial act. So, for purposes of his own bookkeeping, the notary notes that for this particular closing, he earned $70 in notarial fees ($10 per act, seven acts) and the remaining $55 was for the other witness-only loan closer services rendered. The notary MUST pay self-employment tax on the $55; he may elect not to pay self-employment tax on the $70.

While notaries who do not pay self-employment tax on notarial fee income will have more cash to spend in the short run, they are paying less overall into the Social Security fund. Upon retirement, those notaries will receive a smaller monthly social security payment than if they had paid taxes on everything they earned. How much they receive from Social Security each month depends on how much they contributed in the past.

It has also come to our attention that qualifying for social security disability payments could be affected by electing not to pay self-employment tax on notary fees. No one wants to become disabled, but if that happens, a person would like to qualify for disability payments from Social Security.

There are two kinds of disability payments. Supplemental Security Income is based on the financial need of the applicant and is financed through federal general revenues. Social Security Disability Insurance (SSDI), on the other hand, is financed from social security taxes. To receive SSDI payments, an applicant must have earned credits based on his prior employment and the amount of tax paid into social security regardless of whether he was self-employed or was an employee.

SSDI looks at the last ten years of the applicant's work history to decide if he has accumulated enough credits to qualify for disability payments. In general, the applicant has to have accumulated 20 credits during the past ten years. In 2007, for example, one credit is earned for each $1,000 of taxable income.

Obviously, notaries who elect not to pay self-employment tax on their notary fee income will therefore earn fewer SSDI credits than they would if they paid taxes on everything they earn. So it will come down to what is most comfortable for you: paying lower self-employment taxes with fewer SSDI credits earned; or paying higher self-employment taxes with more SSDI credits earned.

While we hope this information will help you make more informed choices about self-employment taxes, there's more to qualifying for SSDI than what we discuss here. For more details, go to http://www.ssa.gov/ . Click "Qualify and Apply" under "Disability & SSI," right in the center of the home page (see the URL below). For the IRS's information on self-employment taxes, go to http://www.IRS.gov , select "Businesses," then "Employment Taxes" under the "Businesses Topics" category. You'll see a link for "Self- Employment Tax" on the resulting page (see the URL below).

HELPFUL IRS LINKS:
http://www.ssa.gov/d&s1.htm -- Social Security disability and SSI qualifications page.
http://www.irs.gov/businesses/small/index.html -- Small Business and Self-Employed One-Stop Resource; Several links for those who are self-employed and/or operate a small business.
http://www.irs.gov/businesses/small/article/0,,id=115045,00.html -- Self-Employed Individuals;  The basics on self-employment, filing requirements, and reporting responsibilities for independent contractors.
http://www.irs.gov/businesses/small/article/0,,id=99930,00.html -- Operating a Business, Helpful links to people who operate their own business.
http://www.irs.gov/businesses/small/article/0,,id=115044,00.html -- Publications and Forms for the Self-Employed
http://www.irs.gov/pub/irs-pdf/f1040sse.pdf -- Schedule SE (Form 1040) Self-Employment Tax
http://www.irs.gov/publications/p334/index.html -- Publication 334, Tax Guide for Small Business
http://www.irs.gov/publications/p587/index.html -- Publication 587, Business Use of your Home
http://www.irs.gov/publications/p535/index.html -- Publication 535, Business Expenses
http://www.irs.gov/publications/p463/index.html -- Publication 463, Travel, Entertainment, Gift and Car Expenses
http://www.irs.gov/individuals/article/0,,id=132035,00.html -- Tax Trails, Quick and interactive, answer a few yes or no questions and you have insight into your deductions, credits, and more.
http://www.irs.gov/businesses/small/article/0,,id=98202,00.html -- Sole Proprietorships; Links to necessary forms for the sole proprietor.

 Questions, comments on this Hot Tip? Email Kathleen@asnnotary.org

 
Self Employment Tax for Notaries
ASN Hot Tip, December 2008-#2

PLEASE NOTE: The following information is meant to raise your awareness of self-employment tax issues. It is NOT to be taken as expert advice on taxes or tax matters. Please be sure to consult a tax expert if you have questions or concerns about your taxes.

A notary who works for himself as a mobile notary and/or signing agent pays self-employment tax on his earnings in somewhat the same way that an employer pays social security and Medicare taxes for an employee [Federal Insurance Contribution Act (FICA) tax], with one major exception. A self-employed notary does not have to pay self-employment tax on income derived solely from fees charged for actual notarial acts, although notary fees must be reported as income on your IRS form 1040.

This elective exemption applies ONLY to the portion of a notary’s income that comes from the fees charged for actual notarial acts. The self-employed notary must account for additional taxable income and must pay self-employment tax on that income.

Please realize that “notarial acts” refers to the specific duties authorized by state law. “Notarial acts” does not mean any additional client services you provide.
 
FOR EXAMPLE...
A notary signing agent charges a total of $125 for a particular home loan closing. There are seven notarial acts required for this closing. This notary resides in a state that permits its notaries to charge up to $10 per notarial act. So, for purposes of his own bookkeeping, the notary records that for this particular closing, he earned $70 in notarial fees ($10 per notarial act for seven acts) and the remaining $55 was income for the other services rendered as a signing agent. The notary MUST pay self-employment tax on the $55; he may elect not to pay self-employment tax on the $70.

While notaries who do not pay self-employment tax on notarial fee income will have more cash to spend in the short run, the fact remains that they are paying less social security tax into the Social Security fund. Upon retirement, those notaries will receive a smaller monthly social security benefit payment than if they had paid taxes on everything they earned including fees for performing notarial acts. The amount of the benefit payment they receive from Social Security each month depends on how much they contributed in the past.
 
HELPFUL INFORMATION—The web site of the Internal Revenue Service provides valuable information for the self-employed individual. Go to www.irs.gov. Click on “Businesses” on the bar directly below the web page heading (Internal Revenue Service). On the “Businesses” web page click on “Employment Taxes” (located under “Business Topics”; see the left margin of the web page). On the “Employment Taxes” web page, click on “Self-Employed Individuals” (located under “Small Business/Self-Employed Topics”; see the left margin of the web page). You will be taken to the “Self-Employed Individuals Tax Center” web page and there you will find a number of useful topics relevant to self-employment.

 Questions, comments on this Hot Tip? Email Kathleen@asnnotary.org

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