My question is that my clients sign a contract which states the income per day and the expense costs for company vehicle, insurance, fuel, laundry of work clothes, meals, hotel lodging, tolls, and if supplies are purchased that the client uses. All these fees are added to my 1099 showing total income when 1/4 of the total payments is expenses and supplies. I am being reimbursed for money I spent out of pocket. Why should this be considered income when I pay for all the expenses out my pocket which is then reimbursed and is included in my weekly consulting income.
You are filing Sch C which allows you to report that income but also to report business expenses which are then subtracted from that income so you don’t pay tax on them.
For self employment income on a schedule C you have to enter the total gross income you received (including the product, parts or reimbursements) and then you enter all your expenses. Reimbursements would be an expense. Product and parts would probably be entered as Supplies. Or you can use line 27a Other Expenses. Then only the Net Profit (or Loss) on Schedule C goes to your 1040 and gets taxed.