"Returns and Allowances" on Schedule C

Forum|Forum|3 years ago
October 12, 2022
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I started selling online recently and I issued customers full refunds for items they sent back or that were damaged. I understand those would defeinitely be included in Line 2 for Returns and Allowances on Schedule C.

I wanted to confirm if the following transactions would also be categorized as Returns and Allowances on my Schedule C form or not:

Partial refunds for shipping overages alone.
Cancelled Orders that I never sent out but that still have a refund transaction from the online selling site I have to account for.

If they aren't caregorized as Returns and Allowances, how would I categorize them correctly? Thank you

Not A Product Question

Best answer by Critter-3

All money returned that was reported in the total GROSS income amount on the Sch C go in the returns/allowance line. If the K-1 form you get includes the money that you eventually refunded then use the K-1 amount as gross and employ the refund/allowance category.

If you did NOT add it into income then you have nothing to deduct against ... so it really depends on your bookkeeping system and how you are accounting for the income and refunds.

Critter-3Answer

Level 15

If you did NOT add it into income then you have nothing to deduct against ... so it really depends on your bookkeeping system and how you are accounting for the income and refunds.