Desparate Help Needed With Info For Tax Return

Business By KMKakes Updated 8 Mar 2015 , 3:19pm by johnson6ofus

KMKakes Posted 11 Feb 2015 , 5:55pm
post #1 of 10

AThe accountant I was referred to at the startup of my business as a Cottage business has had major health issues over the past few months. During the last week of the year and then during January, we were suppose to meet up to go over my 4 months of invoices, receipts, and mileage logs. This individual has serviced our small community for a long time helping small businesses. Unfortunately due to health reasons, he is filing taxes for only 3 days during the week. I was referenced to get quickbooks to log in basic information to assist with the filing and to get in an appointment that won't take up all day. I don't have the funds for that software right now and I do not want that to be my holdup for getting my taxes filed.

I opened a free Waveapps (basic accounting program with some similar features to most notable name accounting programs). I watched online videos (Youtube) regarding how to setup the basics. I made invoices, no problem. Yet, I do not know business terminology enough to know if things like decorating tips, cake pans, sandwich bags, frosting bags, meringue powder, cake mix, and paper towel will be considered an expense, cost of goods (I am still reading up on what it means in business terms), or depreciation. I personally realize that it was a profit loss as the money i made was used to pay for them. As what I think is a marketing tool, I spent the first two months of business handing out a dozen of cookies to many different businesses and schools in my area to get the word out. I made up an invoice to myself as documentation purpose because I knew later into the year, I will forget if it was 2 business or if it was 7. I didnt do much business to go to Costco yet i went to walmart, michaels, and hobby lobby alot. Per reading online quickbooks, cakeboss, and other programs, would these types of businesses be considered a vendor and I will need to create a bill??? for each of them? I greatly realize that every program is different yet if someone can assist me as to some GENERAL possible categorization of what that the donations could fall under.

Yes, we are trying to find someone else. Again this is tax season and out of the 6 tax accountants in my country rural area (the sticks), 4 have told me that they only filing taxes at this time will be unable to assist me with the inital setup, which will keep me from trying to do this. My husband is livid, and we are checking into areas 20 - 30 minutes away. I am determined to find a way until we find someone. Does anyone mind assisting me with even basic knowledge of my above stated issues? All help will be highly appreciated.

9 replies
ellavanilla Posted 11 Feb 2015 , 6:07pm
post #2 of 10

it is not hard to file your own taxes. compile your receipts and open a turbo tax account (or some other online program) and start answering the questions. 

it will guide you through the process. 

 

jen

MimiFix Posted 11 Feb 2015 , 7:11pm
post #3 of 10

Depreciation only applies to more expensive equipment such as a mixer valued at more than xxx amount. (Every accountant has their own opinion. My accountant said equipment more than $200 should be depreciated.) All your ingredients and packaging are cost of goods, so those expenses are deductible. Download the Schedule C. You'll see other categories that are allowable expenses. But the baked goods you donate cannot be handled as "donations" and deducted from business income, since you baked them using ingredients already expensed. Your labor for making them is not an allowable expense. 

 

(PS - My sympathies. I, too, hate doing taxes.)

KMKakes Posted 11 Feb 2015 , 11:01pm
post #4 of 10

AThanks ladies for the responses. Oh no, I assumed the "donated" baked goods as a form marketing (get the word out about my business) would have been an write off of some form

BakerBlackCat Posted 11 Feb 2015 , 11:31pm
post #5 of 10

I don't know if this will help but here's what I do:

(Edit: And boy, do I sound like an accounting nerd!)

 

I split my receipts into various expense categories: Ingredients (self-explanatory), cake decorating (all my sugar decos, sprinkles, etc., but these are all edible), packaging (boxes, cake cards, my labels, and so on); then advertising/promotion, office supplies, durable operating supplies (all of my tools that aren't designated equipment, so spatulas, parchment paper, and cooling racks), and equipment valued at over $500 (like MimiFix said, each accountant will have their own opinion, and this is per my CPA).  I also have licenses/memberships/dues, and returns/refunds/allowances.  This creates a basic income statement to show profit & loss:

 

Sales

Less Cost of Goods Sold ("COGS") (Ingredients, Cake Decorating, & Packaging)

= Gross Profit (Loss)

Less Operating Expenses (Advertising, Office Supplies, Durable Operating Supplies, Equipment)

= Operating Income (Loss)

Plus Other Revenue

Less Other Expenses (Licensings, etc., Refunds/Returns)

= Net Income (Loss)

 

So COGS is anything that you can assign to a specific invoice (cake boxes, eggs, etc.); Operating Expenses are those things that can't be split out individually per order (like my spatulas) but that I use to complete my orders; and Other Expenses is the stuff that happens either on an annual basis (Licensing) or rarely (Refunds). 

 

I use a combination of the Cake Boss Software & Excel spreadsheets - it gets a little cumbersome, and involves some double-entry, but it works for me.

 

I also use invoices to track my advertising (aka, scattering sample boxes all over town), but I use it more for keeping track of who I gave free stuff to, and how much this stuff is costing me versus a return in cake orders, than for actual accounting purposes.  Only if you donate something to a designated charity (e.g. 501(c)3 organization), and they give you a receipt for the market value of what you donated, can you write off the donation.

 

As long as you have receipts & any other backup documentation, you should be fine!  Good luck!!

MimiFix Posted 11 Feb 2015 , 11:46pm
post #6 of 10

Donating baked goods rarely reaps customers. Seriously. I only donate to a charity if I believe in their cause. I don't expect to get any business from my donation.

MimiFix Posted 11 Feb 2015 , 11:52pm
post #7 of 10

Great explanation, BakerBlackCat. Except, donated baked goods are not acceptable as a write off if they have been made with ingredients already expensed

BakerBlackCat Posted 12 Feb 2015 , 12:05am
post #8 of 10

Thanks MimiFix! 

 

Quote:

Originally Posted by MimiFix 
 

Great explanation, BakerBlackCat. Except, donated baked goods are not acceptable as a write off if they have been made with ingredients already expensed

 

Absolutely, and I didn't convey that very well!  Sorry for the confusion!

 

And as for it leading to orders, I agree.  It tends to be received as "yay, free cake!", and not as "hmmmm, I should totally check out this baker..." 

costumeczar Posted 12 Feb 2015 , 12:36am
post #9 of 10
Quote:
Originally Posted by BakerBlackCat 
 

 

Absolutely, and I didn't convey that very well!  Sorry for the confusion!

 

And as for it leading to orders, I agree.  It tends to be received as "yay, free cake!", and not as "hmmmm, I should totally check out this baker..." 

Ain't that the truth...

 

For anyone who's interested, you should look into GoDaddy bookkeeping, which used to be called something else (Outright, I think?). It's 9.99 a month, which is a deductible expense, and it pulls every account into it that you register. I put my Etsy shop, paypal account, credit card and square accounts into it. I don't do my checking account because it tries to pull all of my personal accounts in too, but you can manually add expenses.

 

It has a bunch of different categories that are common to most businesses, and you can go in and put things in specific categories that you create. So I created things like "food expenses" non-food expenses" (things like boards and dowels) and I can divide it all out. The program totals everything for you and it has a category for uncateogrized expenses soif you miss something they'll still catch it.

 

All I can say is that it took my complicated tax situation that took me a week to figure out last year and made it REALLY simple this year.

johnson6ofus Posted 8 Mar 2015 , 3:19pm
post #10 of 10

The old "paper files: method. I would start here to understand what you need to do, then you can move it to any computer program you want. Also understand there can be multiple "right" way to do it, even from different CPAs. Some things are "gray" and can go into different categories. 

Start with schedule C. It lists all the "categories" you need to consider. Then create a notepad and envelope for each category. Part II expenses is the "biggie". 

#8 Advertising. (No, you DONT get to "pay yourself" for making samples. ) Business cards, fliers, ads in the paper, TV commercials (HA!), etc.

Take a sheet of paper and just make a list of any of these items on a "cover sheet" and put the receipt in the envelope marked "Advertising".

#9 Car and truck.  This will be a separate form, but you get to log all miles to buy supplies, pick up printed materials, deliver products or samples, even go to the CPAs office.  So, you need a log book, notebook, calendar, diary...whatever.

#10. Commission and fees. Did you pay any? Probably not.

and so on... there are a few lines that will probably be zero. 

The tricky ones will probably be rent, because you can take a deduction for part of your house as a "work space" and part of utilities as well (#20 and #25 on schedule c).

And like Mimi said, some accountant differ on what is supplies and equipment. Items used for multiple years are often depreciated (part of the cost taken over a few years) rather than taking the costs all at one time.

You can do it! Good luck...





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