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Taxes: Cost Of Doing Businss Vs Goods Sold

 
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Old 03-31-2015, 08:58 PM   #1
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Taxes: Cost Of Doing Businss Vs Goods Sold


I do landscaping and am wondering about how to report deductions for things that I buy in bulk (such as fertilizer or irrigation tubing) and use here and there on projects. I don't charge my clients necessarily for the stuff but figure it into my hourly rate. Would this be considered cost of doing business or goods sold? On turbotax if I select good sold, it asks if I have inventory and says my inventory from 2014 had to be the same at the beginning of the year as the end of the year. What? I don't have a warehouse full of stuff so I don't have "inventory" so I don't know how to address this. thanks.
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Old 03-31-2015, 09:14 PM   #2
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


Quote:
Originally Posted by jwatts View Post
I do landscaping and am wondering about how to report deductions for things that I buy in bulk (such as fertilizer or irrigation tubing) and use here and there on projects. I don't charge my clients necessarily for the stuff but figure it into my hourly rate. Would this be considered cost of doing business or goods sold? On turbotax if I select good sold, it asks if I have inventory and says my inventory from 2014 had to be the same at the beginning of the year as the end of the year. What? I don't have a warehouse full of stuff so I don't have "inventory" so I don't know how to address this. thanks.
A person in business needs a CPA. Don't trust strangers on the internet to properly internet the tax code and keep you legit.

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Old 03-31-2015, 09:27 PM   #3
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


If you are using the Accrual System for accounting and you have more inventory at the end of the year then you have to record your extra (leftover) materials as a Capital Gains and pay taxes. Most contractors don't use the Accrual System.

I don't use Quick Books, but it should be possible to avoid the question regarding whether or not your purchases are for inventory. I believe that QuickBooks is only trying to keep tabs on your inventory, or QB is trying to tell you whether or not you have more or less materials in case you are using the Accrual System.

Your questions is the reason I don't use Quickbooks. I always say that QB does too many things people don't need, don't understand and those things are confusing and make accounting more cumbersome than simple.

Please don't start again with the 'Capital Gains' issue. Capital Gains is not limited to real estate.

In the 1970's California had a Shelf Tax where businesses had to pay tax on leftover materials and stock.

Last edited by pcplumber; 03-31-2015 at 09:29 PM.
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Old 03-31-2015, 09:28 PM   #4
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


You could call turbotax for good advice. They will probably tell you are buying less then $500 at a time and holding it for less then 1 year, to just expense it when it is purchased.
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Old 03-31-2015, 09:48 PM   #5
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


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A person in business needs a CPA. Don't trust strangers on the internet to properly internet the tax code and keep you legit.
I disagree. I must be an expert on taxes. The IRS is always asking me questions
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Old 03-31-2015, 10:10 PM   #6
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


Quote:
Originally Posted by jwatts View Post
I do landscaping and am wondering about how to report deductions for things that I buy in bulk (such as fertilizer or irrigation tubing) and use here and there on projects. I don't charge my clients necessarily for the stuff but figure it into my hourly rate. Would this be considered cost of doing business or goods sold? On turbotax if I select good sold, it asks if I have inventory and says my inventory from 2014 had to be the same at the beginning of the year as the end of the year. What? I don't have a warehouse full of stuff so I don't have "inventory" so I don't know how to address this. thanks.
Inventory is zero to start and zero to end.
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Old 12-10-2015, 09:47 AM   #7
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


It goes under "supplies" and is an expense.
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Old 12-10-2015, 07:04 PM   #8
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


You are a tradesperson and not an accountant. If you think you can do it yourself and save money you are wrong. If you think you cant afford a real accountant, I say you cant afford not to have one. I was in business for quite awhile trying to do stuff myself. My accountant saves me more than she costs me. She has to take courses three or four times a year to keep up with the current tax rules and keep her cpa credentials. . No way you can keep up to the changing rules. Trust me on this one. After thirty years in business I would never try to do my own books and taxes again. Stick with the trade you know and leave the taxes to the pros.
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Old 12-10-2015, 08:13 PM   #9
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


Accural accounting has inventory, Cash accounting does not. Most contractors use the Cash accounting system, which simply means that everything you buy for a job is 'Cost of goods Sold' at the time of buying the supplies. If you are refering to incidentals, that you use on various jobs, then expense them.
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Old 12-10-2015, 10:45 PM   #10
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Re: Taxes: Cost Of Doing Businss Vs Goods Sold


Quote:
Originally Posted by jwatts View Post
I do landscaping and am wondering about how to report deductions for things that I buy in bulk (such as fertilizer or irrigation tubing) and use here and there on projects. I don't charge my clients necessarily for the stuff but figure it into my hourly rate. Would this be considered cost of doing business or goods sold? On turbotax if I select good sold, it asks if I have inventory and says my inventory from 2014 had to be the same at the beginning of the year as the end of the year. What? I don't have a warehouse full of stuff so I don't have "inventory" so I don't know how to address this. thanks.
Technically the items you are buying in bulk and use on your landscape projects are Inventory on your Balance Sheet (Under Assets). As you use these items on various jobs you would match them up against the revenue of each job, thus moving them to COGS as each job completes.

However, to keep it simple, and assuming you use most of the items each year on your jobs, I think they could be initially listed in COGS on your Income Statement. As you do your various landscape jobs, the revenue from those jobs would be entered into Sales on the Income State (P&L), thus Sales-COGS-Admin Expenses=Net Income.

pcplumber:

Capital Gains have no place in this discussion because these items are not Capital Assets. A capital asset is an asset that benefits your business for more than one year such as equipment, a car, computer and office furniture or real estate.

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