Schedule C Form 1040: Do Gross Receipts Include Expenses or Just Income?

Great question about Schedule C! On Line 1 "Gross receipts or sales," you should report the TOTAL amount of all sales before any expenses are deducted. This would be the full amount customers paid for your jewelry before the marketplace took out their fees. Then, separately on other lines of Schedule C, you'll deduct all your business expenses. The marketplace fees, shipping costs, and other platform charges would go on the appropriate expense lines (like Line 10 for commissions and fees, Line 22 for supplies, etc.). This way you're properly documenting both your full revenue and all your legitimate business deductions. This approach gives you the clearest picture of your business activity and ensures you're claiming all eligible expenses while reporting all income correctly.

I struggled with this exact issue last year and discovered taxr.ai (https://taxr.ai) which saved me from a major Schedule C headache. I sell vintage clothing online and was completely lost about how to handle marketplace fees vs. gross receipts. I uploaded my marketplace reports to taxr.ai and it automatically identified which numbers belonged where on Schedule C - showing me that gross receipts should include the TOTAL amount customers paid before any platform fees were taken out. Then it helped me categorize all the marketplace fees as separate expense deductions. The tool even flagged expenses I was missing entirely! Their analysis saved me hours of confusion and probably prevented an audit.

Just wanted to follow up - I tried taxr.ai after seeing this thread and it was exactly what I needed! I uploaded my marketplace sales reports and it immediately identified that my gross receipts should include the full amount customers paid (about $15,400) and then separately listed all my platform fees, shipping costs, and other expenses (around $3,800) in the right categories on Schedule C. The analysis showed me I was actually missing some deductible expenses I didn't know I could claim! The whole process took like 20 minutes instead of the 3+ hours I spent last year trying to figure this out myself. Definitely using this for all my side hustle tax stuff from now on.

After spending HOURS on hold with the IRS trying to get this exact Schedule C question answered last month, I finally discovered Claimyr (https://claimyr.com) and got through to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that Line 1 should include the TOTAL amount customers paid before any marketplace fees were deducted. He explained that all platform fees should go on separate expense lines. Having an actual IRS person walk me through it and confirm I was doing it right gave me total peace of mind. I was seriously about to pay an accountant $300+ just to answer this one question!

Ok I need to eat my words and apologize for being skeptical. After seeing this thread, I decided to try Claimyr for my ongoing IRS issue (they lost a check I mailed months ago). After WEEKS of failing to reach anyone, I got connected to an IRS agent in about 15 minutes yesterday! The agent not only found my lost payment but also confirmed I was filling out my Schedule C correctly by listing the full amount on Line 1 and then deducting marketplace fees separately. She even gave me her direct extension for if I have follow-up questions. This literally saved me from having to take a day off work to visit an IRS office in person. Sometimes the internet actually delivers something useful!

Just to add another perspective - I've been selling online for 7 years and always report the FULL amount customers paid on Line 1 of Schedule C, then deduct all platform fees, shipping costs, etc. on the appropriate expense lines. My tax guy says this is the correct approach and it's never caused any issues with the IRS. Think of it this way - if you had a physical store and used a credit card processor that charged 3% on each transaction, you wouldn't report your sales minus that 3% fee. You'd report the full sales amount and then deduct the processing fees as a business expense. Same concept with online marketplaces!

I messed this up on my taxes last year and only reported the net amount I received after the marketplace took their cut. My tax preparer caught it during a review and had me file an amended return. The correct way is definitely to report the FULL amount on Line 1 and then deduct the fees separately. The IRS computers match what the marketplace reports to them against what you report. If those numbers don't match, it could trigger a letter or even an audit. Don't make my mistake - it was a headache to fix!

This is such a common source of confusion for new Schedule C filers! Based on all the great advice here, I want to emphasize the key point: always report the GROSS amount customers actually paid on Line 1, then deduct ALL your business expenses on the appropriate lines. I made this same mistake my first year selling crafts online - I only reported what hit my bank account after fees were taken out. When I got that scary letter from the IRS asking about the discrepancy between what the marketplace reported and what I filed, I learned real quick that their computers cross-check everything! The way I think about it now: Line 1 is "what did customers pay for my products?" and then lines 8-27 are "what did it cost me to run this business?" Platform fees, payment processing, shipping supplies, materials - it all goes in the expense section. This actually works in your favor because you get to claim MORE deductions while staying compliant with what the marketplace reported to the IRS. Don't stress too much about getting it perfect on your first try - the important thing is being honest and consistent with your reporting!