Do I include processing fee on payments for my business on my income or busines lost?

Yes, PayPal processing fees paid to your business may be entered as Business Income on Schedule C, typically as "Other Income."

Likewise, the PayPal fees you pay are entered as Business Expenses, under "Other Expenses."

The easiest way to find this section of TurboTax is to use the Search box at the top right side of the TurboTax header. Click on the magnifying glass, type in "schedule c", and hit Enter. The first result should be "jump to schedule c". Click on this link to go directly to the business section.

• Click "Yes" when asked if you wish to work on your business income and expenses. Then click "Edit" to the right of the business you wish to review, or add your business info if you have not set up your business yet.
• Work through the income screens until you see "Enter Business Income That's Not on a 1099-MISC" (see screenshot #1 below - click to enlarge).
• NOTE: If you receive Form 1099-K from PayPal, click the box for "Income was received for this business that was reported on Form 1099-K" and enter the total income from this form in the box for "Income or Sales" and skip the next step.
  Otherwise, skip this step and continue.
• Enter the PayPal fees paid to you under "Other Income."
• Continue through the interview until you see the Business Expenses summary screen.
• Click on Update/Start to the right of "All other expenses" and continue until you see "Enter Business Expenses Not Yet Reported"  (screenshot #2).
• On this screen you can add a custom description (PayPal Fees, for instance) with the amount of the fees that were deducted from your PayPal payments.