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DevBarr
February 7, 2025
Question

Splitting invoice deposit for Labor and Materials reimbursement.

  • February 7, 2025
  • 1 reply
  • 0 views

So the customer payed using their credit card, and it auto deposited just fine, but I'm having trouble trying to reconcile or categorize for tax purposes part of the invoice as repayment for materials I purchased for the customers job and then my labor charges for doing the job.

 

Not sure if I'm just going about it wrong or what I should do, I just don't want my accountant whos linked to my account to list it all as income for end of the year and get taxed on money I spent and was just payed back for.

 

Thank you to anyone who can help me.

1 reply

FishingForAnswers
FishingForAnswers
February 7, 2025

@DevBarr  If you purchased the materials that you sold, then in one way or another, you will be able to write off the cost of the materials as a business expense.

 

If you sold them at cost, then it would level out to $0.00 and you would end up not paying income taxes on that specific amount. When it comes to income taxes, you pay income taxes on profit, not on income.

 

That being said, it is still income and may affect the relevant insurance policy's cost when it comes time for your yearly audit. No, it doesn't matter why you were buying materials for them, or how you worded it; if it's on your invoice, I assure you that the insurance company is going to treat it as income.

 

As far as the categorization, if your invoice was set up properly, the income would already be split properly between materials income and labor income.

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