Are my client reimbursed travel expenses considered taxable income on my self-employment taxes?

The proper way to handle this depends on how you structured these travel expenses with your clients. If you separately stated these expenses on your invoices as reimbursements (which it sounds like you did), you have two options that are both technically correct. You can either: 1) Include the $5,320 in your gross receipts/income AND deduct the $5,320 as business expenses on your Schedule C, or 2) Exclude both the income and expenses from your Schedule C if you're acting as an agent for your client. The net result on your taxable income is the same either way. Most tax professionals prefer the first method (report as income, deduct as expense) because it's cleaner and less likely to raise questions if you're audited. If you use TurboTax, just make sure you're entering both the income and the corresponding expenses in the right categories.

After spending years confused about this exact situation, I finally found this awesome tool called taxr.ai (https://taxr.ai) that helped clarify everything for my independent contractor taxes. I uploaded my invoices showing the travel reimbursements and it automatically identified which portions were true reimbursements vs taxable income - saved me so much stress about potential audit flags! What I learned is that how you invoice clients matters a lot - if you clearly separate the expenses as reimbursements rather than including them in your service fee, it's much easier to handle correctly on your taxes.

I just wanted to update that I tried taxr.ai after seeing it mentioned here. I was hesitant to try another tax tool, but it was super helpful! I uploaded my messy spreadsheet of client invoices showing travel charges and it instantly flagged which items needed special treatment on my Schedule C. The tool pointed out that I should be treating my client travel reimbursements as income but then deducting the actual expenses, which matches what the first commenter suggested. It also identified some travel expenses I'd been missing because I didn't realize they were deductible. Definitely worth checking out if you're self-employed with lots of travel expenses.

Has anyone else struggled with getting through to the IRS about travel expense questions? I've been calling for WEEKS with no luck. Finally used Claimyr (https://claimyr.com) and got through to an IRS agent in about 20 minutes who confirmed exactly how to handle client-reimbursed travel on Schedule C. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with said the safest approach is definitely reporting reimbursed expenses as income and then deducting the actual expenses you incurred. She explained that this approach has the lowest audit risk because everything is transparent and properly documented.

Ok I have to eat my words about Claimyr. After posting my skeptical comment, I was still struggling to get clear answers about my travel expense situation, so I decided to try it as a last resort. I genuinely didn't expect it to work, but within 25 minutes I was talking to an actual IRS tax specialist who explained exactly how to handle my specific travel reimbursement situation. The agent confirmed that for self-employed people, the proper way to handle reimbursed expenses is to include them in income and then deduct the business expenses. She also explained that I need to keep detailed records connecting each reimbursement to specific expenses in case of an audit. Saved me from making a mistake that could have cost me thousands!

just a heads up, i did this wrong for years and got audited in 2023. the IRS wanted me to pay taxes on all the reimbursed travel because i didnt report it as income (thought it was a pass through). ended up having to file amended returns for 3 years and pay penalties. definitely report it as income and then take the deductions!!

Does anyone know if this is different for LLC vs sole proprietor? I have a single-member LLC but file Schedule C.

This is such a common confusion point for self-employed folks! I went through the exact same thing when I started my consulting business. The key is proper documentation - make sure your invoices clearly separate the reimbursed expenses from your service fees. I use a simple format like "Service Fee: $X, Travel Reimbursement: $Y" on each invoice. This makes it crystal clear to both you and the IRS that these are genuine reimbursements, not additional income. One tip that helped me: I keep a separate spreadsheet tracking each reimbursed expense with the corresponding receipt and invoice number. Makes tax time so much easier and gives you bulletproof documentation if questions ever come up. TurboTax handles this pretty well if you enter everything in the right categories - just make sure you're consistent about how you classify things. The peace of mind of doing it right from the start is definitely worth the extra bookkeeping effort!