Is a payroll service line 27a or line 26?

The gross wages the service disburses are line 26, so only the provider's own fee reaches line 27a and the two must never be combined.

Is a payroll service line 27a or line 23?

The employer share of social security, Medicare and unemployment tax that the service remits is taxes on line 23, not part of the service fee.

Where does a payroll service go on Sch C? Line 27a

Q: Where does a payroll service go on Sch C?

A payroll service belongs on Line 27a, other expenses. The fee a payroll provider charges to run the pay run, file the returns and produce the W-2s is an administrative service cost, usually described in Part V as payroll service fees and carried to line 27a. It is entirely separate from what the service pays out: the wages themselves are line 26 and the employer payroll taxes are line 23. If the provider also does your bookkeeping or your tax filing as a professional engagement, that part of their bill is line 17.

Short answer Schedule C, Line 27a Other expenses (itemised in Part V)

A payroll service belongs on Line 27a, other expenses.

Why line 27a

The fee a payroll provider charges to run the pay run, file the returns and produce the W-2s is an administrative service cost, usually described in Part V as payroll service fees and carried to line 27a. It is entirely separate from what the service pays out: the wages themselves are line 26 and the employer payroll taxes are line 23. If the provider also does your bookkeeping or your tax filing as a professional engagement, that part of their bill is line 17.

Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so a payroll service lands on Line 27a without you sorting it.

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What a payroll service is confused with

Line 26, wages: The gross wages the service disburses are line 26, so only the provider's own fee reaches line 27a and the two must never be combined.
Line 23, taxes and licenses: The employer share of social security, Medicare and unemployment tax that the service remits is taxes on line 23, not part of the service fee.
Line 18, office expense: If payroll comes bundled inside the accounting software subscription you already deduct as office expense, keep it on line 18 rather than splitting one invoice across two lines.

Examples that belong on line 27a

$45 monthly Gusto base fee plus $6 per employee
$29 a month Patriot payroll subscription
$360 a year for QuickBooks Payroll
$200 year-end W-2 and 1099 filing fee
$150 set-up fee for a new state payroll registration

What does not belong here

Gross wages paid to employees, which are line 26.
Employer payroll taxes remitted on your behalf, which are line 23.
Your own draws, which are not an expense at all.
A bookkeeping or tax return engagement from the same provider, which is line 17.

What to keep

Keep the provider's monthly invoices, which separate the service fee from the funded wages and taxes. The quarterly payroll returns support the line 26 and line 23 figures.

Other expenses on line 27a

Expense	Line
a background check	Schedule C, Line 27a
a branded gift for a client	Schedule C, Line 27a
a business coach	Schedule C, Line 27a
a conference registration fee	Schedule C, Line 27a
a hot-desk day pass	Schedule C, Line 27a
a professional certification renewal	Schedule C, Line 27a
a stock photo license	Schedule C, Line 27a
a telephone answering service	Schedule C, Line 27a
a trade show booth fee	Schedule C, Line 27a
a translation service	Schedule C, Line 27a
an online course	Schedule C, Line 27a
bank fees	Schedule C, Line 27a

Related lookups

Sources

This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.

Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.

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