Hi All,
I’m preparing my 2022 taxes with TurboTax (Self Employed). I “started” the business in October and didn’t have any sales, but wanted to expense some of the startup costs (depreciation on Easel, work table, new camera for posting my art to DPW, etc).
My question is, when expensing things like new canvases, paint, etc, do you put this as supplies, or figure out what portion of the paint went into creating a painting and put it as cost of goods sold? My preference would be to just expense it as supplies (much more straightforward and trackable).
What do most of you do?
Jack
Not sure you can do anything without having sales to claim expenses against. I turn in a spreadseet every year with a list of sales; then all the expenses on another sheet, and a summary sheet. The expenses include paypal and credit card fees, gas expense from going back and forth to post office to mail paintings, etc… My accountant also adds some other expenses such as part of house as studio, etc.
I am adding as more straightforward answer that I just add as expense what I buy as paint — not what I use per painting. You will use it all year. I would ask an accountant maybe about filing with no sales, just don’t know about that.
@Libby_Anderson thanks so much for your response. I finally finished my return and did file with no sales, listing those items that I purchased in the year as supplies. This of course just reduced my regular income.
Everything I read on the internet said that in the initial year of starting a business it was not unusual to have no sales, especially, if you started late in the year as I did.
TurboTax also reported that there was nothing in my return that should raise any flags. I’ll report back to this thread if that turns out to be untrue.
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Taxes. I try to spend as little time as possible, yet claim every dime I spend. I work full time as an artist. My accountant loves me because I have proof of everything.
I get a 3 ring notebook and print out everything and put it in the notebook.
The first page is my schedule. Events, shows, plein air events, teaching… like a calendar.
I run everything through my email and one credit card. I take a couple of days each year and print everything out, tally up all sales, all expenses.
Some are supply write offs, the big items, i depreciate. Mileage is a huge write off. I document that as I drive. I have a little notebook on the dash of my truck.
While those 2 or 3 days of gathering everything up are miserable, I learn something about what works and what doesn’t in my business. The notebook becomes like a diary, documenting my year. It tells a story.
I hope that helps.
Debra Howard
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Thanks Debra. I started up my business in Oct of last year so gathering everything wasn’t too arduous this year. But as you say, the act of gathering everything gives perspective on what to change for next year. I started a spreadsheet with a tab for expenses and a tab for income and am keeping log as I go so 2023’s gathering effort should be a piece of cake.