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Returning Member

Listing Materials and supplies under Cost of Goods Sold

HI--Can someone clarify something for me?  I have a custom embroidery business.  I use items to embroider on--tshirts, towels, tote bags.  I use fabrics and stabilizers and thread for making the items, but they're used once and done.  I also use needles, scissors and patterns daily, which are used over and over.  I understand that these are all separated under Cost of Goods Sold section. But separating materials and supplies is confusing.


In 2019, there was an example that the turbotax rep say that supplies NOT included in Cost of goods sold, which are are supplies like needles that are used over and over for production of inventory.  BUT in the program, materials and supplies are BOTH listed under CGS, not separately. 


The Cost of purchases I have determined are items that are sold but don't need much alteration (such as a tshirt that I embroider on) . 


I am confused on "Materials and supplies" which are a separate category, but together in the program. 


How do I separate out materials, which were determined to be "fabric" in the 2019 example and "needles" were in the supplies category, which was stated is NOT to be included in cost of goods sold, yet it is outlined it in the example as a "supply" expense. 


If someone could clarify what category would patterns, needles, scissors would be, if not "materials and supplies" under Cost of Goods sold, where would they go?  Business expense? 


I tried replying to the example, but I received no response.


Thank you!

3 Replies

Listing Materials and supplies under Cost of Goods Sold

If your business makes less than $1 million a year then you can skip the cost of good sold section all together and simply enter all of these under the general category supplies. There’s no need for you to kill yourself in the COGS section.  Read the IRS Sch C instructions for more information.

Returning Member

Listing Materials and supplies under Cost of Goods Sold

I do make less than $1M but turbotax is telling us that we have to fill this section out.  

Listing Materials and supplies under Cost of Goods Sold

No you don’t. If you had a figure in starting inventory then enter no new costs and put in a zero for the ending inventory to make the switch. 

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