I’m small manufacturer (bags, accessories etc). I elect to do cash based accounting and treat my inventory of raw materials as “non-incidental materials and supplies”. Where on the schedule C should I be deducting the cost for all these “non-incidental materials and supplies” that I used to make my goods this year?
Options I’m considering:
OPTION 1: claim these “non-incidental materials and supplies” on line 38 of COGS, then carry that number down to line 42 (leaving all other lines in COGS blank).
OPTION 2: claim these expenses on line 22 “supplies”.
OPTION 3: claim these expenses on part v “other expenses”, and title the deduction “ Non-incidental materials and supplies for cost of goods sold”
