I’m using turbotax. Where on Schedule C do you put the cost of the 2×4’s and thinset and such? Is that considered supplies?
“When asked if you can do something, tell’em “Why certainly I can”, then get busy and find a way to do it.” T. Roosevelt
Discussion Forum
Discussion Forum
Up Next
Video Shorts
Featured Story
Listeners write in about haunted pipes and building-science tomes, and they ask questions about roof venting and roof leaks.
Featured Video
Highlights
"I have learned so much thanks to the searchable articles on the FHB website. I can confidently say that I expect to be a life-long subscriber." - M.K.
Replies
In my books that would be Cost of Goods Sold
Only if you are selling 2x4's or selling assemblies containingh 2x4's and maintaining inventory of completeled assemblies.Unless there is significant inventory (and I the 1/2 case of nails left over from the last job is not significant) then there is really no reason to use COGS.Supplies in Part II is the most logical place.But if for any reason he wants to break it down or has stuff that might be split into several different one then it can go on part IV (which carries to part II).
As far as taxes go, there is no differnce, but knowing your company's financial health and the ability to bill clients for the parts easily is the basis for which decisions you make. JLC will have two classes on Quick books that export to Turbo tax and those instructors would be good people to ask your question of.
Depends on several factors. First factor to consider is that I am NOT an accountant. But I do my own taxes.
It could go under COGS, and this would be pretty common.
However, if you don't carry an inventory, you might not have to have any entries under Part III (COGS) on Schedule C. Then you would put the expenses in Part II, under Supplies (line 22). This is a little simpler than COGS.
Net result is the same. They are legitimate business expenses, and there is no financial benefit to posting them in Part II vs. Part III on Sched. C. Just figure out which fits your business better.
Pete Duffy, Handyman
job material costs and other direct costs generally go in cost of goods sold. costs of running your operation (think overhead and payroll)
i'm a cpa/irs agent turned lawyer who plays norm nights and weekends.
Since we now know your qualifications/background............How do you interpret the office in the home and the driving to the job deductions for us self employed carpenter/contractors? It would be good to hear another side to this story.
thanks.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
office in the home really got the irs' panties in a wad in the 80's and some law got changed. i have not looked at it in awhile, but i recall section 280 having some specific requirements related to regular and exclusive business use, and meeting with clients, customers, etc.in the space. if you qualify, you get to depreciate some portion of the house and deduct utilites for a portion of the house. the goal is to keep anyone from deducting a home office.the short answer is, if you check "home office" on your return, flags will go up.all of your other regular office expenses are deductible, even if used in your home (computer, internet, business phone, cell), so i think you are only giving up utilities and depreciation. when you sell the house, you have to recapture the depreciation as ordinary income, and it just creates more paperwork.it seems to me that about 1% of all personal returns are audited, and that includes bill gates, warren buffet, etc., that get audited every year. 99% odds of winnng make for a pretty good lotterydisclaimer: i dont have a freaking clue what i am talking about and anyone making decisions based on something i posted is a fool.
I realize these are your thoughts, not necessarily gospel. But you've got way more experience in this area than many of us.
OK, you've got 900 sf of shop/tool-material storage space and the office area in the home-files, desk, billing, trade pubs - work area for bids, plan review. The space in the home-100sf. Total home and shop used for business-1000sf. Total area of home and shop3500sf. 28% business use. Are you saying it is not reasonable or prudent to take the use (not depreciation) of this as a deduction?
Any opinion on the deductions pertaining to business van in regards to mileage. There's been questions here about when to reasonably start the odometer.
thanks.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
calvin ---Your questions about home office and van milage should be directed towards your tax preparer. I say that because they will be the one who answers the IRS's questions. My wife is a very agressive CPA. We both have home offices and no offsite office. We deduct 50% of our house for business purposes. We start milage for deduction purposes when we leave the house (home office).About audits:My wife had a small client, $25k gross, randomly selected for an audit. 5 days of an IRS employee on site asking for information, checking line by line every business record. Several differences of opinion, but not enough issues for anyone to get upset over.
Thank you for your input. Amazing how the IRS will sometimes expend so much energy. Puts more fear in the little guy than it nets in payment.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
a separate business structure is treated different than an office in the house. irs pub 587 (http://www.irs.gov/pub/irs-pdf/p587.pdf) says you can deduct the expenses of a separate structure if you use it regularly and exclusively in your business. if the wife parks her commuter in one bay every night, its probably not exclusive.the home office must be your principal place of business, and must be used regularly and exclusively for your business. (if not principal place, then you must meet the other tests and regularly meet with clients there.on the mileage issue
IRS pub. 463 (http://www.irs.gov/publications/p463/ch04.html#d0e2985) gives an example of a person who is self employed with their principal place of business in the home and says Example 2.Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your client's or customer's place of business.Example 3.You have no regular office, and you do not have an office in your home. In this case, the location of your first business contact is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. Although you cannot deduct the costs of these trips, you can deduct the costs of going from one client or customer to another.so, if you dont maintain a shop or a qualifying home office, the first leg of your morning commute (buy ice for the cooler at the first convenience store) is nondeductible. if you run a business out of your home, all your business trips are deductible. if you run 5 cars in the business, you cant use the mileage deduction.tax avoidance is legal and encouraged by your government. tax evasion is illegal. imho, if you can shoehorn your situation into the code, you can take the deduction. if your issue is in the gray, consider the risks of taking the deduction. i probably play the audit lottery, at times, but the risk is low.shifting back into norm mode now. i either have to finish reglazing the 48 holes left after restoring the old windows or finish the two adirondak chairs for my baby's 20th birthday. (she made the mistake of seeing my prototype and saying "i want one".)
Work on the chairs.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
one more thing. if you are audited and they find an disallowed deduction, you pay tax and interest. if they find something more egregious such as willful, intentional disregard for law, they tack on a negligence penalty of 20% of your under payment. if you dont report income and they catch you, it may bump you up into the fraud area.if a person identifies himself as an irs agent and shows you his crenditials (photo id in a small wallet) it's civil. if he shows you a badge, it's criminal and dont answer any questions without a lawyer present.the majority of contact you will have with the irs will be "correspondence audits" which come in the form of a letter that tells you that they have a 1099 for income that they cant see that you reported (interest income mostly).
Thanks dave.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
2 more things ---1) If your home office percentage deduction is large enough, you may lose your home in bankrupty. In Oklahoma the percentage is 20%. Above that and your home is not protected.2) The IRS is very pleasant to work with. Our interactions with the IRS have always worked out well for clients even clients who have brought their problems for returns others prepared.
Thank you again, important points.A great place for Information, Comraderie, and a sucker punch.
Remodeling Contractor just outside the Glass City.
Quittin' Time
the majority of contact you will have with the irs will be "correspondence audits" which come in the form of a letter that tells you that they have a 1099 for income that they cant see that you reported (interest income mostly).
We hear from the IRS every year, without any large income for them to fish in. Always about 1099 items or our lack of Schedule C. I keep a form letter in the computer and change the date. Seems to always apply. Never even a phone call follow-up.
But we don't claim a home office for the flag reason and having been burned on depreciation recapture once, I'm not going there either.
Thanks for the ID tip.
PAHS Designer/Builder- Bury it!
I've now gotten those correspondence audits two years in a row.
The first year was because an employer of mine from '03 failed to deposit the payroll tax he withheld. Once I pointed them to him they sent me a letter saying All OK.
The second was because our tax preparer failed to list the cost basis of some stock we sold last year. That required an amended return and a small check to cover the difference.
I'd say they're running 100% on their cross-checks of 1099s and W-2s.
I'd say they're running 100% on their cross-checks of 1099s and W-2s.
No experience with the W-2s, but I believe you're correct about the 1099s. We get a bunch of them every year and the bookkeepers aren't always real careful.
So a few minutes rummaging in the computer to find and re-date my letter and our problem seems to always go away. Always wondered if they saved them. Same wording from me, year after year. LOL Can't imagine working there (IRS).PAHS Designer/Builder- Bury it!
If you deduct a portion of the purchase price of your home as a business deduction, then any gains on those amounts upon selling will be taxed unless you purchase more business or commercial real estate. So most poeple deduct the interest and utilities that the percentage covers and don't include the principal.Kirk