New Jewelry Business, Cash Basis, No Inventory Being Reported, Expensing Materials and Supplies Question

[ClareCA]

Hi There, I started a business in 2022 and have about $10,000 in expenses which are not part of my materials of sold items.  I know to put the small tools and books under Other Misc. Expense, but I am confused about where to put other things that I use in production.  The Supplies seem to apply to things you would find in an office, and the description says, "Supply expenses are incidental items that cost $200 or less or last less than a year."  The supplies that I have purchased for my business are other types of supplies that are needed for production but not included in sold items because it would be too hard to factor that in.  For example, I wrap my jewelry in a decorative embroidered pouch and place it in a gift box with a ribbon and paper flowers on top before shipping.  I also give a embroidered jewelry roll as a gift with purchase when a certain dollar amount is purchased.  I have bought these items in bulk, and the jewelry rolls cost over $1000 for a pack of $250.  Also, since I am expensing COGS and not showing the IRS my inventory, where does that amount go?  That figure is around $4000.  Please let me know how to deal with these costs using Turbo Tax Home & Business.  Thank you!

[MonikaK1 · Accepted solution]

Please see this article for more information on how to report supplies vs. inventory in TurboTax Home & Business and other versions. An excerpt follows:

Reporting inventory costs in TurboTax Home & Business

1. With your return open, select the Business tab and proceed to the Let's gather your business info screen.
   • If you haven't entered any business info yet, select Start in the first section, Business Income and Expenses and provide the requested info.
   • Otherwise, select the Update button and then Edit on the following screen.
2. On the Your Business screen, select Start/Update next to either Inventory/Cost of Goods Sold or Other Common Business Expenses depending on how you chose to report your inventory costs.

• If you don't have inventory but want to report materials and supplies as COGS, select Inventory and then enter 0 for both beginning and ending inventory values.
• If you chose "Other Common Business Expenses," select Supplies on the next screen.

You can record any other associated costs under the expense line item that best identifies the cost.

[ClareCA]

Thank you so much.  This is helpful because I didn't want to report inventory, and so I put "No" in Turbo Tax when asked, but now I have selected "Yes," and put in the "0" and was able to continue on to where I wanted to be.  One more quick question if you don't mind.  I purchased some large showcases and travel cases for the time when I want to sell my jewelry at a festival but haven't done one yet.  Can I write these off as a business expense, and if so, what category are they?  I also bought mannequins and to photograph my jewelry on for listing it on Etsy.  Would these be office expenses?  Thank you in advance.

[MonikaK1]

You are welcome!

Your larger items such as showcases should be listed as assets and may be deductible this year or may need to be depreciated.

To get to the entry screens for business assets, please take the following steps: 

1. Login to TurboTax Online ( https://turbotax.intuit.com/) 
2. In the Search box type schedule c. 
3. Click the “Jump to schedule c” link.
4. Continue the Schedule C section of your return until you get to the Assets/Depreciation section. 
5. Follow the onscreen instructions to enter your asset information.

See this article for more information regarding depreciation in TurboTax.