I have a new business (embroidery) and have lots of questions on filing my schedule C next year. I want to make sure I m collecting the right information today so it s not difficult come April. I ve tried to research this as much as I can, so would like clarification on if my assumptions are correct:It is my understanding that boxes I purchase for shipping can be expensed as an office expense, such as line 18? I bought them in bulk and have a lot remaining but I ve read I don t need to count this as inventory value and can expense it immediately.I also buy a lot of needles, and other items that don t go in the actual products that would be expensed on the same line?What about embroidery software, fonts -- same, line 18?The freight I pay to have fabric brought to me -- that goes as part of the COGS, line 36? But leftover value carries over as value of inventory? Fabric is so difficult -- I know the price per yard that I pay but it will be very time consuming to calculate exactly how much I ve used / exactly how much is remaining to determine COGS and remaining inventory values... is it at all possible to expense this raw material (fabric) all at once vs carrying it over year-to-year as inventory?What about thread -- even more difficult to calculate than fabric -- can I expense this all at once as an office expense or do I really have to guesstimate the used portion in COGS and remaining portion as inventory value?The freight I pay to ship the product to the customer -- that goes as an other expense? Line 27/48?Credit card processing fees I pay to paypal -- line 27/48?I have a resale certificate but I ve still been paying tax on a lot of my purchases, especially if I shop locally. Am I out those taxes (I shouldn t be paying taxes on materials included in a product I resale (and collect taxes on), right?...) or can I actually expense them as part of the COGS since I ve paid them?For office supplies such as needles I mentioned above, I pay tax on those too but those are items I keep and should pay taxes on. Do I include the taxes paid on those items on line 18 or do I break apart these sales taxes as separate items and place them on line 23? And the taxes I ve paid on fabric mentioned above, as part of the COGS line 36 or part of the taxes line 23?The sales taxes I ve collected from customers go as revenue line 1, but then also get added into line 23?This seems to be a lot of work but any clarification will help.THANK YOU!!
It is my understanding that boxes I purchase for shipping can be expensed as an office expense, such as line 18? No, Line 27 (brought over from pg 2 Part V) I also buy a lot of needles, and other items that don t go in the actual products that would be expensed on the same line SAME What about embroidery software, fonts -- same, line 18 This should be Depreciation. This is a long term expense, but you can elect Sec 179 to expense this year.COGS - cost of purchase includes freight in. for your operation, don t worry about it. As for COGS: beginning inventory + purchase - ending inventory is good enough for your operation.if you purchase a lot of the same type fabric, it might be easier to average the cost. Tally up the total cost of purchases and divide by total yardage gives cost per yard. At the end of the year, estimate your yardage (you don t need to get too precise) and that s your ending inventory. The freight I pay to ship the product to the customer -- that goes as an other expense? Line 27 yes, carried over from page 2 part V Credit card processing fees I pay to paypal -- line 27/48?Yes Bank CC Fees I have a resale certificate but I ve still been paying tax on a lot of my purchases Add the tax into inventory cost. Then fill out the resale certificate for each state you purchase materials and inventory from and submit to your vendors For office supplies such as needles I mentioned above NOT office expense, manufacturing expenses or repairs/maintenance Line 27 page 2 part V again Cost is your TOTAL cost including any tax. and you should pay the sales tax because you are not reselling them. They are a repair type cost. The sales taxes I ve collected from customers go as revenue line 1, but then also get added into line 23 Sales tax is NOT a revenue, it is a fiduciary transaction. I have seen people do it, though. So, again, Line 27 Page 2 Part V. Sales Tax _________________________Additional DetailsCan sewing thread be Sec 179 also (this would be so much easier) or do I need to compute it as ending inventory (since it is a material sold in my products)?Unless you are talking a LOT of thread, I d directly expense it.And you don t Sec 179 inventory. It s depreciation (equipment, furniture, buildings) that Sec 179 applies to. Inventory is tied to Cost of Goods Sold (CoGS).
