Every penny you get paid on an invoice is considered income even if you billed for an expense you incurred ... it balances off naturally on the Sch C.
And the IRS does get copies of the 1099 forms however on your tax return they only need the total income amount and that is how they reconcile your return to what was reported ... as long as you report at least as much as the 1099 forms you are good to go.
