Must everything be broken down in Expenses?

[Bpex]

If I have well-kept/categorized books and records of every transaction, is it necessary to break everything down in Business Expenses categories in TurboTax (and Business Income/Cost of Goods Sold for that matter)? As in do I have to record the specific amounts for Advertisement, Office Expenses, Taxes and Licenses etc., and even further break down each transaction within each category since it gives boxes to fill in separate ones? Or is there a catch-all where I can just enter my entire operating expenses as shown on my P&L (minus specific things like depreciating assets and startup costs)

If I do have to separate them out, would small tools and equipment under a few hundred dollars go into Supplies?

[RobertB4444]

The categories are so that the IRS can decide whether you raise any interesting questions about your expenses that they would want to take a longer look at.  

For instance, if you are a delivery driver there is a certain amount of expected mileage expense.  If you are a remote computer programmer mileage shouldn't be that high.

That's also why they ask for your business category.

You could lump everything in to one total and enter it and you would get the same bottom line as breaking it out into categories.  But it also may raise a question as to why you don't have this or the other expense for your type of business and it is generally a poor idea to get them asking those types of questions.

Small tools and equipment can go in supplies or in a separate category that you label 'small tools and equipment.  Either one works.

@Bpex 

[Bpex]

I would rather do it the best way, so if I can use some separate categories that's probably better. How do I make new categories though. Would I just enter "small tools and equipment" in one box in the "Miscellaneous Expenses" or maybe under "Supplies"? Then just put in the total for that category from my P&L?

Same with some other categories that are in my Accounting software, but not in TurboTax. Just find the closest matching TurboTax category or use the Miscellaneous category, then use one box within that for the whole category? Not having to separate out each transaction, correct?

[DianeW777 · Accepted solution]

Yes. New categories should be listed under Miscellaneous expenses or if you would consider something a supply and regularly used for your business you can choose that category.

Likewise you can also choose the closest category description for the expenses in your accounting software that match the IRS description of expense. 

It's important not to lump all expenses into one category such as utilities or legal fees or taxes, when they are operating expenses.  Product for resale as example should definitely be listed separately as materials or supplies which have a direct impact on your gross receipts.

As you can see by looking at the Schedule C (click the link), the IRS has categories on the form similar to the TurboTax interview.

[cornyb4]

Which category should licensed software and commodity software go in?  How about business magazines and newsletters?  Thank you.

[PatriciaV]

Off-the shelf software is generally a Miscellaneous expense with a custom description. Magazines & newsletters are the same.

You might look at the expense section of Schedule C or the instructions for completing Schedule C for more help categorizing your expenses to fit on the IRS schedule. See IRS About Schedule C (Form 1040).

Note: If you enter a general business expense in the wrong category, it will not affect your taxes. Just be sure you don't enter the same expense twice.

[cornyb4]

Thank you for your thoughts.

[DOrr3D]

If I have an airline trip for business in January,  February,  March, April, May and June, do I list out each ticket price separately,  or can I add up the total ticket costs for all six months and lump them all together under one entry under Travel?

[DavidD66]

You should add the cost of all your airline tickets and any other travel expenses (hotels, taxi/uber, rental car) and list as a single amount: Travel Expense.  Do not list individual amounts, but you do need to break down into categories of similar expenses.  For example, you wouldn't have separate line items for pens, paper, calculator, file folders, and staplers.  You would have a single expense line:  Office Supplies.  You wouldn't combine Advertising and Continuing Professional Education, and you wouldn't combine legal fees with insurance.