schmoopie Posted January 8, 2007 Share Posted January 8, 2007 Just getting to this ....LOLBUT last year when I did it we were just growing, this year, wow..... got lots of stuff!!But on things that are partially used, is it better to guessimate that you have more or less in inventory.... tax wise?I try and be as accurate as possible but when rounding on FO, Dyes, wicks etc. is it better to show more in your inventory or less?Any thoughts on the matter would be appreciated.My accountant is very by the book so anything I ask her is usually answered by the "book"TIA Quote Link to comment Share on other sites More sharing options...
cre8tivelegance Posted January 8, 2007 Share Posted January 8, 2007 Hi there!I don't do inventory with my taxes. My accountant tells me that my business isn't big enough to have to worry about inventory. So we just add up all my expenses along with all my sales and show either a profit or loss. I guess it depends on whether or not you have a store front or if you're working out of your home.....as for me, my business is a home-based business.Not sure if that helps.....but if your business is home-based, you may want to check with your accountant as to whether or not it's necessary to do inventory. Quote Link to comment Share on other sites More sharing options...
chris77 Posted January 8, 2007 Share Posted January 8, 2007 Rather than worry about showing more or less in your inventory, I think it would be in your best advantage in the long wrong to be honest is your reporting and show what you have.......for wicks I would count out a set amount and weigh it....then weigh the total in that category for a better "guesstimate" instead of maybe eyeballing it. know what I mean? Quote Link to comment Share on other sites More sharing options...
sudsnwicks Posted January 8, 2007 Share Posted January 8, 2007 But on things that are partially used, is it better to guessimate that you have more or less in inventory.... tax wise?I try and be as accurate as possible but when rounding on FO, Dyes, wicks etc. is it better to show more in your inventory or less?If your estimate is high it will make your earnings look like more (because you used less ingredients to produce the number of candles which you sold). But since this will affect you the next year (because your year end inventory is your next year's beginning balance) it is best to be consistent from year to year i.e. stick with the same method of estimating each year. Otherwise what you do now may be beneficial for this year but it may negatively impact you next year if you used a different method of estimating next time. Quote Link to comment Share on other sites More sharing options...
David Fields Posted January 8, 2007 Share Posted January 8, 2007 Might be able to add something here. One of our daughters is a tax accountant for a major acctg firm...If you complete a schedule C (I think that is the form) for business profit and loss, you must do a yearly inventory. It should be as accurate as possible. Any estimations you do should be consistent year to year. The IRS looks for consistentcy and reasonableness and written records. The inventory is necessary to compute Cost of Goods. The beginning year's inventory plus all of the stuff you bought to make the stuff you sold less the closing year's inventory is your cost of goods which is deducted from your sales (along with a lot of other expenses). So, unless you are not reporting anything (sales or costs or sales taxes or anything else) from your business, you must do an inventory. HTH Quote Link to comment Share on other sites More sharing options...
Marilyna Posted January 8, 2007 Share Posted January 8, 2007 Plus, where I live, we have to pay property tax on our inventory. Quote Link to comment Share on other sites More sharing options...
RobinInOR Posted January 8, 2007 Share Posted January 8, 2007 I do a schedule C, actually 2 - one for my biz, and one for DHs biz. I don't do inventory, I do cash accounting and not accrual accounting, and ignore the back of the schedule C.Luckily Oregon doesn't have an inventory tax, so that makes our lives much easier. It will all depend on your business structure and what your accountant says - you should follow their advice. Since they're the ones that would go to any audit with you If I were to do inventory, I'd weigh everything out as close as possible. And stay consistent year to year like sudsnwicks said. Quote Link to comment Share on other sites More sharing options...
schmoopie Posted January 8, 2007 Author Share Posted January 8, 2007 Sounds good. Thank for the advice all. Great idea on weighing the wicks, was not looking forward to counting over a thousand wicks. Quote Link to comment Share on other sites More sharing options...
Beth-VT Posted January 8, 2007 Share Posted January 8, 2007 David & Robin....BINGO. They are both correct. It all depends on your accounting method, it has nothing to do with whether you are home based or not, store front or no, nor really the size of your biz. Cash Accounting Method: Expenses are deducted when actually paid, income when it is actually received. Which means any supplies purchased via credit cards can not be deducted until that bill is actually paid. No yearly inventory is required because you only deduct what you have actually paid for. Accrual Method: Expenses are deducted when you incur them (paid or not), and income when it is earned (received or not). Year end inventory is required to adjust for the cost of items you have deducted but still have on hand.You are not allowed to change your method of accounting w/o IRS approval, so if you've already filed in year(s) past, you must continue to use the same method. If you want to change, there is a form that must be submitted to the IRS. HTH. Quote Link to comment Share on other sites More sharing options...
RobinInOR Posted January 8, 2007 Share Posted January 8, 2007 Beth - that's the best description I've seen of those 2 methods yet. Short, sweet, to the point. I'm saving those so the next time someone asks I can sound more coherent Quote Link to comment Share on other sites More sharing options...
Beth-VT Posted January 8, 2007 Share Posted January 8, 2007 Oh please do....it friggin' took me long enough to figure it out myself, lol ! Quote Link to comment Share on other sites More sharing options...
LaVida Posted January 9, 2007 Share Posted January 9, 2007 ok, last year I didn't know about inventory and yadda yadda yadda.... the person did ask me what I had left and all that.... but I didn't know so she filed it all as supplies.... It was much easier for me and her I guess. I hope I don't get audited.... It's not like I claim that stuff the following year. I sold some of it, but I'll count it as part if my earnings (or maybe I shouldn't...) :undecided Quote Link to comment Share on other sites More sharing options...
LaVida Posted January 9, 2007 Share Posted January 9, 2007 Hi there!I don't do inventory with my taxes. My accountant tells me that my business isn't big enough to have to worry about inventory. So we just add up all my expenses along with all my sales and show either a profit or loss. I guess it depends on whether or not you have a store front or if you're working out of your home.....as for me, my business is a home-based business.Not sure if that helps.....but if your business is home-based, you may want to check with your accountant as to whether or not it's necessary to do inventory.This is how it's done for me.... I hope this is right, and I don't get audited... Quote Link to comment Share on other sites More sharing options...
Deliciously Wicked Posted January 9, 2007 Share Posted January 9, 2007 Dumb question. How do you seperate shipping expenses for the supplies you order. Do you seperate it as an individual business expense or is it just included in the supplies you order? Does that make any sense? I am so not good at explaining myself. The good thing is as long as we do not have a lot of snow I am supposed to be going to a networking meeting tomorrow evening and taxes is the top subject that will be discussed. This will be my first year of having the business part of taxes to file and I am trying not to be a nervous wreck. Thanks. Quote Link to comment Share on other sites More sharing options...
David Fields Posted January 10, 2007 Share Posted January 10, 2007 If you are using the accrual acctg method, you can add the shipping costs to the cost of the items. When you inventory, the cost of the items on hand includes their portion of shipping costs. Or, if you don't add shipping costs to the items, the shipping goes under its own line called "shipping" or "freight" or something like that. Then on the Schedule C it comes off as a business expense. Quote Link to comment Share on other sites More sharing options...
Beth-VT Posted January 10, 2007 Share Posted January 10, 2007 Yup.....what he said :highfive: Quote Link to comment Share on other sites More sharing options...
LaVida Posted January 10, 2007 Share Posted January 10, 2007 :undecided Quote Link to comment Share on other sites More sharing options...
momof4kids Posted February 6, 2007 Share Posted February 6, 2007 YIKES!! This sure sounds like a lot of work for the little money I made the last 2 months of last year. Quote Link to comment Share on other sites More sharing options...
Marisa Posted February 6, 2007 Share Posted February 6, 2007 Great thread, I just finished my husbands business and My business taxes.. Whew ..Not fun!!LOL Quote Link to comment Share on other sites More sharing options...
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