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LA Business - Categories for Expenses??????


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Hi.

I have been working on my business taxes and have to find a better way!!!!!!!!!!!!!!!!!!

All these little receipts in a file; some were for a specific quilt (fabric, stabilizer), others are general (like starch, pins, etc. used for many/all the quilts I do).

How the heck do you all categorize your expenses?

Is there a list of standard longarm expense categories somewhere you all use?

Any help would be really, really good. THANKS!

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I'm anxious to see the answers to this. Each year hubby and I go back and forth. He does the taxes, I hate taxes! We read the definitions and try to go from there. I couldn't tell you how he finally categorizes them. I do know that I compared my thread to ink. You need ink to write well I need thread to quilt. Made sense to me!:P:P:P

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Originally posted by njquiltergirl

Hi.

I have been working on my business taxes and have to find a better way!!!!!!!!!!!!!!!!!!

All these little receipts in a file; some were for a specific quilt (fabric, stabilizer), others are general (like starch, pins, etc. used for many/all the quilts I do).

How the heck do you all categorize your expenses?

Is there a list of standard longarm expense categories somewhere you all use?

Any help would be really, really good. THANKS!

Well, I use Quickbooks. I love this program. It's so easy. All you have to do is enter the item one time and it does the rest. Some of the coding was already set up, but I added others specific to quilting. I set up accounting codes to identify different items (e.g. quilting supplies, longarm quilting services, etc.)

My income codings all start with the number 4 series and my expense codings all start with a 5 series.

I kept my Quickbooks data entry as simple as possible (meaning not a lot of detail--the devil is in the details) so I keep it easy and simple, short and sweet. So basically, it's income (quilting services, longarm training) or expense (quilting supplies, office supplies, training, education, advertising, travel...) It's super fast for me to do my data entry and balance my numbers at the end.

PS: I have a CPA since the beginning. I write off her charges to do my taxes. :) Oh, and she's a quilter too. SHe is my customer. How's that for peas and carrots? :D

I hope this helps.

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List all items bought specifically for your business--even those Swiffers and that lint roller refill. If you have your receipts filed away, you can prove what they cost and that they were dedicated to the business. It isn't necessary to categorize everything into thread, notions, stabilizer, fabric, etc--it's just all "materials". That is what you will give your tax person. Cash that went out and cash that came in. Deductions can be taken on lots of things also pertaining to your business--classes, mileage, advertising, etc, but be ready if you ever need to prove that the trip to the Guild meeting was all about business. I write down mileage for quilt pick-up or drop-off, and mileage, meals, parking, and lodging for classes--but not to shows. And I have receipts to back it all up.

Don't count fabric unless you sell quilts, don't count piecing thread ditto. Don't add those new Gingher scissors you bought unless all you use them for is the business.

All your accountant wants is numbers. Dig up all the provable amounts you can, to pay the least on your taxes. Be ready if ever audited to provide proof of purchase and use. Don't forget to depreciate your machine.

I guess the easiest way is to total all material expenses--one number for all.

If you separate your home-based business expenses with a percentage for power, phone, water, etc. use the allowed formula for your location and square footage. That is a business expense to be given the tax man. Then all your income. Lucky is the longarmer whose intake is bigger than her outgo! Better to pay some taxes than go in the hole--and maybe lose your "pro" status.

Disclaimer--I am not a tax person, nor do I ever hope to be. My DH does our taxes, juggling three home-based businesses and two outside incomes. And he makes me keep every scrap of paper and receipt--it's a mess the first of April and he makes me wade through it all and give him the totals. But his side is harder to figure and I am thankful for him!;)

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I took the plunge and went with Quickbooks (like Shana suggested) and just had a meeting with my accountant's Quickbook expert last week to set up last year's 1st year of business accounts. She told me I could split out my quilting expenses as extensively as I wanted to but when they get my books they will lump them together for income tax purposes. I agree to keep it as simple as possible, but IF you wanted to track what you're spending in thread, for example, keep it separate so that at the end of the year, you'll see exactly how your $$'s were spent. If you don't care, then don't separate it. Now I need to go look at the link above before I input more receipts today. You know what I'll be doing this week.

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The folder categories I listed came from the tax form itself, and I file receipts into those categories. And that's how they are documented on the Schedule C.

I just looked and there are some other business expense categories (27 total) listed on the Schedule C, but nothing I would encounter, but some of you might. For instance, rent or lease of equipment, employee benefit programs.

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I HATE taxes!!! I, too, use quickbooks and there is a lady who quilts and does the organization side for quilters and she does the QB for me (and did I say I HATE taxes!!!)

She seems to be doing a really good job keeping track of the business items and the sales tax so I think it is a really great program.

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The IRS won't really care what category you track the expense under, as long as it's an allowable expense. You definitely want receipts and proof.

- Expenses are costs you incurred in order to run your business.

- Assets are not expenses. Assets, like sewing machines and long-arms, get depreciated.

- Inventory is not an expense. So - if you buy fabric, this is inventory until you actually use it, and is not deductible as an expense.

- Your time in making a charity quilt is NOT an expense, and is NOT a charitable deduction. Your thread, batting, etc are deductible as charitable deductions.

Julia

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Guest Linda S

Machine Quilters Business Manager. You enter not only your quilts, but your supplies, etc., as you get them and at the end of the year you run your financial report. Voila! Neat, tidy, and oh so easy.

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This is a big relief. I thought I had to categorize the expenses in a special way. Georgene, your link was really helpful. I printed out the IRS form and now have a good sense of how to organize. I just do not have enough income to justify buying a special software program...or want to take the time to deal with it.

Thanks all!

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I made some hanging folders with labels as I described. Every time I get a receipt for something, I file it in the folder. At the end of the year, I take them out, tally them up by folder, staple each category together, put them in another folder together with our tax returns for backup.

Then I use those same folders for the next year and start all over again. The hardest part is tallying the totals as the end of the year.

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I have an appointment with my accountant tomorrow. This is my first time going to one, as my husband always did our taxes, but because I started my business in April 2010, we felt we needed a professional.

I printed out info from Machine Quilters Business Manager program. That was so easy! I also kept all of my house receipts which I listed on an Excel spreadsheet - gas, electric, water, cell phone, internet, taxes, etc (I don't know what he can use, so I listed it all for him) then I listed the overall square footage of my house, along with the square footage of the room I use for my business. This way we can figure the amount of utilities that I used for my business.

I am excited and nervous all at the same time. We always owed on our taxes, so maybe this year we will fair much better. Keep your fingers crossed for me. :)

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