Actually yes.
This usually comes up in the context of someone who wants to show higher net income to qualify for earned income credit or qualify to make IRA deposits. But yes, you are required to report your income and your legitimate expenses and only pay tax on the net profit. Overstating your income to qualify for a tax benefit is just as improper as trying to hide income.
And if you are trying to show a larger income for a non-IRS purpose such as qualifying for a mortgage, it may be considered to be a fraudulent loan application if you get caught.
