Tax write off as business owner

[Alias300]

As a business owner the cost of a unit can be written off as expense.  You write off gas, dump fee's, ect....


You end up making a profit but have a bunch of items that for hat ever reason you don't sell.

As stated in another thread, if you donate the goods you are only allowed to write off donations up to what you paid for unit...

But you already wrote unit off as a business expense.

Can you write off again?  Or how do you value left overs?

[alloro]

Can you write off again?

No that would be double-dipping. You can never claim more than you paid out unless money has rolled over between tax years.

[Alias300]

So how is it different than buying a new stove for the resturant, writing it off as expense, than later I buy new stove a donate old one and take a write off?

[alloro]

So how is it different than buying a new stove for the restaurant,

A stove is equipment for the business, a.k.a. a reinvestment, it is not resale product.

[Alias300]

Okay. I get that.  Bad example....

Lets try....

I got 100 jerseys for $100 to sell at game.   
I sell 50 at $5/ea, $250....$150 profit
Now I got these 50 jerseys I'm not going to sell for whatever reason...end of season or something.

I donate the 50 jerseys to Goodwill.   

I already wrote off the full $100 against my $250 in sales.
What's the write off?   Nothing?  $50 cost?  $250 since that's the going resale value? 

[alloro]

In the jersey example you would be able to write off $50 because the value of the jerseys are $1 each. Failing to make a profit is not a loss in the eyes of the IRS, only the cost is. So basically on your taxes you would show a cost of $100, a donation of $50 an adjust gross of $200 (250-donation). In the end you pay tax on the net of $100.

 250 gross income
- 50 donation
-100 cost basis
 100 taxable net profit

[Alias300]

Which brings us back.....

Buy a unit for $100.   Make $200 in sales.  $100 profit.

Donate the rest......how much do you write off?

[the teacher]

You guys are giving me a headache!

I have been working on my taxes all day trying to get them ready to take to the accountant this week.  I have added up all my vehicle and fuel costs, office supplies, building maintenance, rent, utilities, labor cost, cost of lockers, purchases from various other types of auctions and purchases from places other than auctions. 

I've added up all my sales, and split them out between taxable and non and figured out my sales tax.  By doing all that an breaking everything down by category, it saves me a ton of money on bookkeeping fees.  I hate tax time!  It's a lot of work and I hate all the damn paperwork! 

Anyway, if you are asking these questions, get your stuff all together and actually see a tax preparer.....don't just guess and get yourself an audit....do it right!

[alloro]

Donate the rest......how much do you write off?

The fair value of the donated items or the amount shown on the donation receipt if there is one (whichever is less.)

[alloro]

Anyway, if you are asking these questions, get your stuff all together and actually see a tax preparer.....don't just guess and get yourself an audit....do it right!

We are having a discussion, we are not doing our taxes. Besides, I don't pay anyone to do my taxes, I do my own.

[Alias300]

Anyway, if you are asking these questions, get your stuff all together and actually see a tax preparer.....don't just guess and get yourself an audit....do it right!

This years taxes were done weeks ago.   Getting things lined up for next year.

I tally everything monthly so it's all just a matter of adding up each month.

But this coming year is going to be different.   Have a lot more going on tax wise.
Just getting an idea of how my record keeping is going to be handled.  Current system is just a bit to basic......

[alloro]

Just getting an idea of how my record keeping is going to be handled.  Current system is just a bit to basic......

Get and use Quicken. Once you've set it up to your needs you just enter things as you get them. At the end of the year you can give the file to your accountant or import it into the tax software of your choice.
http://quicken.intuit.com/

[Alias300]

Very well may be the way I go.  Thanks.


For 2013 its just a matter of staying on top of record keeping.
Pay my own health insurance, premiums are easy enough. But having a very simple but very expensive surgery coming up.  Gotta keep track of co-pay, co insurance, mileage.....

Saved all my items to donate for this year because my income is going to be higher.  So will be over $500 mark.  Have to keep better records...

I'm taking some classes and will (should) qualify for some deductions.

Cashing out some investments.

Making some big purchases so sales tax will be higher than IRS calculaor for my predicted income level.

I just don't want to get to next tax season and have piles of paper to go thru!   Organization is critical.

[Bryan]

Okay. I get that.  Bad example....

Lets try....

I got 100 jerseys for $100 to sell at game.   
I sell 50 at $5/ea, $250....$150 profit
Now I got these 50 jerseys I'm not going to sell for whatever reason...end of season or something.

I donate the 50 jerseys to Goodwill.   

I already wrote off the full $100 against my $250 in sales.
What's the write off?   Nothing?  $50 cost?  $250 since that's the going resale value?

Slightly different answer than above.  But it works if you do the Schedule C correctly:

Cost of Goods Sold (COGS) is deducted at the time that the items are sold.  This is why the tax form asks for an inventory at the end of the year.

You sold 50 jerseys for $5 for $250 in gross income.
The cost of those 50 jerseys is $50.  ($1 each)
Profit on those 50 jerseys was $200.

You now have 50 jerseys left, with a cost basis of $50.

• If you hold them for future sale, you do not deduct the cost until the year you sell them.
• If you throw them away, or they become spoiled, you write-off (deduct) the $50 on your business form.  On Schedule C.
• If you donate them to Goodwill, you will remove the $50 in product from your inventory.  As a sole proprietor, the jerseys will now be a personal deduction on Schedule A.

From the tax planning standpoint, you want to be deducting things on Schedule C instead of Schedule A, if you can.  A business deduction will lower your self-employment (Social Security) tax.  It also lowers your AGI, which could help you with other things on the return.  A personal deduction does neither. 

Practical solution:  Just don't tell me that you disposed of the items in front of the Goodwill store.

Bryan

[Bryan]

Which brings us back.....

Buy a unit for $100.   Make $200 in sales.  $100 profit.

Donate the rest......how much do you write off?

Technically, you allocate the $100 cost of the items among the items you bought in the locker, in direct relation to their relative value. 

Your $100 locker has 3 items in it, one you can sell for $500, one you can sell for $300, and one you can sell for $200.  You will allocate the cost for each at $50, $30, $20.

If we're talking $100,000, then you will need to sit down and allocate the costs among the items.  If we are talking about $100, it's OK to make a good guess, or even just write off the whole $100 for the big items and make the little stuff worth $0.  Cuz at that level, if you're really going that it's not worth the time to figure it out, then it won't make that much difference anyway.

The IRS is hip to any reasonable allocation, as long as you don't use that rule to take advantage of them.

Bryan