Business Reimbursement or Schedule C Income/Deduction

[peggysioux5]

Taxpayer has a small business and is also a W-2 employee in similar type work. Through his self-employment business, he has access to better rates for some material than his employer. He purchases material through his self-employment business and "sells" same product to W-2 employer at same rate of purchase. Would that be considered a reimbursement and not be considered as income/deduction for his self-employment business being there is no mark-up or should it be considered income/deductions that basically wash each other out on Schedule C?

[Catherine]

I'd put it on Sch C so that the records match what is reported on his returns.  You don't *have* to sell product for profit, after all.  That way if he's ever audited, you won't be trying to explain to the IRS why these purchases for the business and the sales of same are not being reported.

[DANRVAN]

Well it could fall under an accountable plan, but it would net out the same on Schedule C. 

[BulldogTom]

I would advise him to get a personal credit card for those charges and keep those transactions off the schedule C and treat them as a reimbursement at the employee / employer level.   Some jurisdictions use gross sales to determine taxes and fees charged to businesses.   Like my business license.  

It is very nice of him to help out his employer, but I would advise him to keep his schedule C business "clean" of these types of transactions.

Tom
Modesto, CA

[Catherine]

@BulldogTom that's a great idea going forward if it works.  Depends on whether his Sch C business has a dba name.  If invoices are made out to "Joe's Goodies" instead of "Joe Smith" it's gonna end up on Sch C no matter how he pays.

[Abby Normal]

I'm still not clear why one small business can get better prices than another, but I would run it through his "books" so it matches his bank statements.