As a freelancer who has made purchases on behalf of my client, how do reimbursed expenses factor into my reported income for taxes?

by Chad Schweighart, CPA | Jul 24, 2019

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I'm a freelancer who purchased certain expenses on behalf of my client, and I am not sure how reimbursable expenses factor into my reported income for taxes. When they reimburse me, does that amount need to be reported as income, even though it is just a repayment? Suppose I add a mark-up when billing that expense back to my client, would only the mark-up amount be reported as income or the full amount? 

On line 1 of the Schedule C, you are to report gross receipts. What this means is that you show all receipts of income in the gross receipts line, including all expenses for which you are reimbursed. You then would include those expenses that were reimbursed as expenses in the proper category for that disbursement. 

As for the mark-up of the expenses, this is why you report gross receipts; it will capture the full amount you are billing, including any mark-up. You would then report the full amount of the expenditure in the proper expense category. For more detailed advice, I recommend consulting with your tax practitioner.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Chad Schweighart, CPA, is an accounting manager with Gift & Associates in Mechanicsburg, Pa.

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