What expense category is Notary Services and Fees?

In the course of doing business, companies frequently need documents to be notarized—from contracts and affidavits to real estate deeds and loan agreements. The small fees paid to a notary public for these services are a common and necessary business cost.

While the fees are typically modest, they are a deductible business expense. It's important for accountants and business owners to categorize these costs correctly and understand their tax treatment. This guide will clarify how to handle notary fees according to IRS rules to ensure your business remains compliant.

Notary Fees Category

The fees you pay to a notary public for services related to your business are an ordinary and necessary business expense. These costs fall under the general category of Legal and Professional Fees.

IRS Publication 334 allows for the deduction of professional fees that are directly related to operating your business. Notary services, which provide legal verification of signatures and documents, fit within this classification.

Important Considerations While Classifying Notary Fees

The tax treatment of a notary fee depends on the purpose of the underlying document being notarized.

Operating Expense vs. Capital Expenditure

This is the most critical distinction.

• Deductible Now (Operating Expense): If the notary fee is for a document related to your day-to-day business operations—such as notarizing a client contract or a business permit application—the fee is a currently deductible expense.
• Capitalized (Part of an Asset's Basis): If the notary fee is part of the process of acquiring a capital asset, the fee must be capitalized. For example, IRS Publication 946 notes that legal and recording fees incurred as part of a real estate closing are added to the basis of the property. A notary fee on a property deed would be treated this way.

Business vs. Personal Documents

You can only deduct notary fees for business-related documents. The cost to notarize a personal document, such as a personal will or power of attorney, is not a deductible business expense.

A Note on Notaries' Income

It is interesting to note that while a business deducts the payment of a notary fee, the receipt of that fee has a special tax status for the notary. IRS Publication 334 clarifies that fees received for services performed as a notary public are reported on Schedule C but are not subject to self-employment tax.

Examples of Notary Services Expenses

• Fees paid to a notary public for notarizing contracts
• Costs associated with notarizing real estate documents
• Expenses for notarizing affidavits or other legal documents

Tax Implications and Recordkeeping

To deduct qualifying notary fees, you must report them correctly and maintain proper documentation.

How to Report the Deduction

For a sole proprietor filing a Schedule C (Form 1040), deductible notary fees are reported under Part II, Line 17, Legal and professional services.

What Records to Keep

You must have documentary evidence to substantiate the expense. Your records for notary fees should include:

• A receipt from the notary public or the service provider (e.g., a shipping store that offers notary services).
• Proof of payment.
• A record of the document that was notarized to prove its business purpose.

How Fyle Can Automate Tracking for Notary Fees

Fyle helps you capture and organize small but important costs like notary fees, ensuring they are properly documented for tax time.

• Capture Receipts Instantly: Snap a picture of the notary receipt with the Fyle mobile app for immediate, on-the-go submission.
• Create a Clear Audit Trail: Attach a copy of the notarized business document directly to the expense record in Fyle.
• Track by Client or Project: Code notary fees to a specific client contract or legal matter for precise cost allocation.
• Automate Your Accounting: Sync the categorized professional fee directly to the correct GL account in QuickBooks, Xero, NetSuite, or Sage Intacct.