Categorizing Refunds on Schedule C

Forum|Forum|4 years ago
April 12, 2022
4 replies
30 views

Looking at the details for Schedule C, Line 2/Returns & Allowances, the IRS instruction form states, "A sales return is a cash or credit refund
you gave to customers who returned defective, damaged, or unwanted products."

I started selling products online this year through seller sites (not handmade) and gave refunds to customers for defective/broken products but did not require the sender to return it to me.

How do I correctly categorize a refund charge on my schedule C? Would it be "Other Expenses"/Part V? Thank you in advance!

Not A Product Question

MinhT1

Level 15

The refunds to customers are reported as Returns and Allowances on line 2 of Schedule C which ia a deduction from Gross income.

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BTCraftingAuthor

Level 3

Thanks, I'm aware of that but just wanted to make sure that also applies to products that were NOT returned to me.

I bolded the part of the IRS instructions in my post that I needed clarification about.

Carl

Level 11

I'm aware of that but just wanted to make sure that also applies to products that were NOT returned to me.

Those products are still included in your Cost of Goods Sold (COGS) section. So even if it was returned, more than likely a non-functioning product would have been thrown out anyway. Doesn't change the fact that you had to pay for that item.