Business Question - Inventory, Taxes, Etc.

[KAYAK45]

I could write a book about this stuff! Back offffff!

Your schedule C is an "estimate". The actual,true absolute, numbers are a fallicy!

No amounts are "accurate".

You drove more or less miles for business. Make a fair guess.

You used $xxx electricity, divided by y months? times "w" rate times # of light bulbs equals....;..good guess!

The IRS agents are good folks too. If..your are fair.. if you use DUE DILIGENCE and have a real business.. do not worry.

Inventory will work out over a say two /three year period to be exactly correct. On any one day it's wrong! No matter how you do it.

Use really good guesses!

Kevin

[Russ]

Eldorado;

Didn't TurboTax tell you that you didn't have to report inventory if:

Leather Products Manufacturing Important: You are not required to report inventory if either of the following apply:You had less than $1 million in sales or receipts in each of the last three yearsYour business is primarily providing a service, rather than selling a product

Of course, if you hit the $1 million in sales receipts, bully for you. Perhaps it shouldn't be a side business

Naturally, there's some tax benefits to reporting the expense of COGS, but maybe it's not worth it if yo try it both ways.

Russ

Folks,

Not sure this is in the right forum location, so bear with me.

I just finished my first walk through of my taxes, having completed my first year of my leatherworking side-business. Not unexpectedly, I ended up with a loss. Not alot of sales against a decent amount of buying leather, liquids, tools, etc. I don't mind the loss at this point.

Here is the real question, Turbo Tax took me through a series of questions regarding inventory, cost of goods sold, and varous expenses. I found that in our business, the question of inventory seems a tricky one. Most of the finished goods I have on hand are prototypes -- for display online and so that customers can say, "I want that one in this color, with this design". So that leaves me with a mix of hides, double shoulders, a mess of different dyes, and such. I don't think any of us gets 100% use out of every hide, and the useable amount remaining after we cut into it is almost impossible to figure. Same is true of a 3/4 full jug of dye. So, how do you all value your materials inventory in a meaningful way? Do you just estimate it?

It seems like a problem almost unique to our industry, since if we were cutting this stuff out of vinyl, we'd know how many useable yards were left. With leather, its hard to figure what's, "left on the roll", so to speak. Any thoughts are welcome.

Thanks in advance.

[Eldorado]

Thanks everyone.

You've all given me alot to think about, and thanks for the quick responses. It sounds like I need to get a tad more specific about inventory and tracking, but it also sounds like good estimates are good enough. I'll have to give the details of this some thought. Pretty much everything I do is custom and often for the first time. That makes knowing whether I have useable pieces in scrap a little more difficult.

Interestingly, my primary job is as an auditor, so I have a bit of understanding of these things. However, its kind of interesting, fun, and frustrating (all at the same time) that doing this stuff at a corporate level doesnt seem to help me much at the small business level.

Any additional insights are definitely welcome.