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Katiebookkeeper
Level 1

Reimbursements

For my clients, I sometimes pick up food for them and then add the total to their invoice. They are directly paying for the food and therefore i don't want these items to count toward my revenue. They are reimbursing me 100%.

i currently code the expenses for the food to a cogs account, and on their invoice I code the line item for the reimbursement to the same account so it zeroes out.

 

for example, in June let's say I had a total revenue of $20K but $2K of it was just clients repaying me for stuff I bought on their behalf. I kinda feel like I should not be paying double taxes on that $2K since I already paid sales tax on it... so reporting my gross income at 18K? Or will I not need to pay taxes on the items I bought because the account was zeroed out? 

thanks!

 

Solved
Best answer August 30, 2021

Best Answers
Rustler
Level 15

Reimbursements

It is bad form to post income and expense to the same account, and there is really not a reason to do it. The P&L is what counts, on the P&L income is reduced by expense and the bottom line is your taxable income.

 

Typically what customers pay you is income and what you spend is expense.

 

Sales tax and income tax are two different things. If you paid sales tax to buy what the customer asks for, then you invoice the customer for that same amount, expense and then income.

View solution in original post

1 Comment 1
Rustler
Level 15

Reimbursements

It is bad form to post income and expense to the same account, and there is really not a reason to do it. The P&L is what counts, on the P&L income is reduced by expense and the bottom line is your taxable income.

 

Typically what customers pay you is income and what you spend is expense.

 

Sales tax and income tax are two different things. If you paid sales tax to buy what the customer asks for, then you invoice the customer for that same amount, expense and then income.

View solution in original post

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