(Poop on the figuring out part. Not the paying. I'm totally cool with paying them.)
I was filling out my expense spreadsheets tonight and as I do so, I always update my annual tax spreadsheet. Then next February or March, everything is right there and organized and ready to be categorized and added up! ...Except that never happens. I sit there in mid-March, staring blankly at the 1040 Schedule-C, probably drooling a little, clicking back and forth between the form and the instructions, trying to translate IRS-speak into non-business-person-dummy-speak, and figure out how the hell I categorized my expenses. My accountant said *generally* as long as you include eeeevvvvvvverrryyyything, the categories themselves aren't that big of a deal.
Still, it seems silly to go through all the trouble and not do it right.
So I zone out looking at the numbers and the various colors (because I color-code all the categories to make them easier to visualize and then add, since I have absolutely no clue how to tell Appleworks, "total this shit up" and I still do it by hand; no not with an abacus but one step up from that). And then it gets to be 2 in the morning and my husband has told me he wants to send the taxes in THE NEXT DAY so I just start plugging in numbers and adding them up so I can get to bed.
And every time I say, Next year will be different. When I have time, I will research exactly what all these categories mean so I can file properly and know exactly where the numbers came from when I look at them the following year.
But do I? Noooooo!!
Tonight became that day! Yay! I decided as I updated my taxes spreadsheet that it would probably be a good idea to go over all the categories NOW, when I have time and when I'm not in a sleep-deprived-stupor.
I think I've got them all straight. I'm not sure if this helps anyone else, but since there are like 4 categories for "supplies" I thought I'd summarize what I found tonight.
On Form 1040 Schedule C (Profit & Loss From Bidness):
Part 2 Expenses
Line 18: Office Expense. So like, office supplies and crap. Tape, staples, pens, whatever. This also includes Postage! Did you know that? Cause it doesn't say on the form. You have to look in the instructions to find it!
Line 22: Supplies (not included in Part 3): Well WTF other kind of supplies are there? Now I have to jump ahead all the way to section 3 and figure out what doesn't fit in there (or in Line 18 as office supplies)? What IS this? According to the instructions, it's "supplies" that you would consume in a year. "Books, professional instruments, equipment" are examples given. But that's confusing because most books or equipment last longer than a year, so you go into depreciation?? I have no idea. Maybe that's why they include the text "not included in part 3" because they don't even know. And they couldn't come out and say, "Uhhh... whatever.. doesn't fit... anywhere else. Put it here. Yeah that sounds good."
Part 3 Cost Of Goods Sold
Line 36: Purchases less cost of items withdrawn for personal use. Geez. So obviously items for personal use don't belong on your taxes, duh, so if you leave out the part of this category written by Captain Obvious, you have... Purchases. Ok, still, what? Through a bunch of internets-super-sleuthing, I found out that this means: Things you buy to sell. I *believe* this refers to something such as a print bag. You aren't doing anything special to it, just slipping your print into it to sell. Same with a frame, or a mat. You're buying the item to technically resell it. If I'm wrong on this please let me know- I'll correct this post so no one makes the same mistake as I'm going to be making ;)
Line 38: Materials and Supplies. Hello, could you be any more vague? Through even more exhaustive research than line 36 I found out this is stuff like materials you use to make a finished product. So if you make your own frames then the wood and stain and whatever hardware you use would be included here. And I suppose the ink and paper you use to produce prints that you're selling would be included here, too. And paint. And canvas. Orrrrr maybe canvas fits into the above category!?
Whatever. As long as you're consistent I guess.