In my first post, I said I report all income.
I report all cash income, checks, credit cards, PayPal, Venmo on my Schedule C.
I also report all business expenses such as shop supplies, tools, etc, on the Schedule C.
I use Quickbooks self employed to track all of my work orders. All my labor (which is my taxable income) gets reported on the Schedule C.
I am confused as to why the IRS is interested in parts I get directly reimbursed for. It's not taxable income. So if I buy a $4.95 intake seal in the morning, and the customer picks up the vehicle that afternoon and pays me back the 4.95, I need to report that 4.95 on the Schedule C as an expense? I do track all parts on the work orders. The work orders are itemized with a parts list.
My ultimate question is this: If the IRS is now seeing PayPal and Venmo payments, they see me reporting less than the total amounts that they (IRS) see, will that trigger anything? Audit, etc?
I would be reporting less than the IRS sees because I'm only reporting the labor.
