[Jewelry making - Article 00834] - Re: [Orchid] Tool donation & taxes- donating jewelry

[Brad Simon]

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    Mark, If you are deducting labor as part of Cost of Goods Sold you
    are asking for trouble.  Of course you should include labor as part
    of CGS when figuring prices, but NOT when figuring taxes on its sale
    or donation.  Labor is deducted when paid.  I.E. when you give your
    employee a pay check or a pay check to yourself if your business is
    incorporated.  You cannot deduct that labor cost again when you sell
    that piece of jewelry or donate it to a charity.  If you do, you are
    deducting that cost twice and that is illegal.  If you are
    self-employed then your profits of the business is your income from
    your labor which you report on your taxes.  You cannot deduct the
    'cost of your labor' from the 'income of your labor'. If
    Self-Employed people were able to deduct the 'cost of their labor'
    from their sales and donations to charities, then every
    self-employed person in the US would pay ZERO taxes.  After all, all
    profits from a self-employed business person is the income of their
    labor.  The 'cost of your labor' while at the bench making a piece of
    jewelry, is no different than the 'cost of your labor' selling the
    piece of jewelry or while doing the multitude of things needed to be
    done to run your business. I know from experience that many retailers
    'hide' income in their business by including labor as part of Cost of
    Goods Sold on custom designs, but that does not make it right, it is
    Tax Evasion - hope you never get audited. Brad Simon


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