[Jewelry making - Article 00240] - Re: [Orchid] [Biztalk] Taxes - First Sch C

[Kimberly Starbard]

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Hi Liz:

    People tend (myself included) to do a bit more accounting for their
    taxes than they need to. Let me start off by saying that I am not an
    expert (but anyone who tells you they are an expert should be
    suspect) in taxes. I worked in Corporate Accounting for a large
    company before I became a stay at home mom. 

    There isn't a need (that I know of) to track what you have in
    finished goods unless you would like to keep track of it on your own.
    Basically, the IRS just wants to know the change in your level of
    costed inventory. Essentially, there are 2 components to profit/loss.
    The first is money in or out the door. The second is the change in
    the level of your inventory. If you have more inventory (I'm talking
    components, not finished goods) at the end of the year than you did
    at the beginning, than you made a profit. If you have less, than you
    have a loss. 

    You spoke of not needing to take many deductions. Please don't feel
    guilty about taking deductions. Every time you get in the car to go
    get supplies, write it down in your travel log. It's (last time I
    checked) 37 cents a mile and it can really add up at the end of the
    year. If your are on the line between hobby and real business, keep a
    log for your work hours. If, at the end of the year, you don't have
    enough hours to make you a business, than you will be reclassed to a
    hobby. Don't let this scare you. I don't keep an hourly log, but,
    based on the amount of jewelry I sold, I can say I worked "x" number
    of hours because each piece takes one hour. 

    For inventory, here is an example. I make beaded jewelry. I buy
    beads and components. This year, I am taking formal inventory. I
    count the beads/components I have at each parts' price. I add it all
    up and that is my ending inventory. I count all the components in my
    finished jewelry and take each components price and add that all up.
    I add that to my ending inventory. The total is my total ending
    inventory I hope this helps a little because, in my opinion, it's all
    way too complicated. 

Good Luck,
Kim Starbard
Cove Beads.

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