I have a client who is a self-employed mechanic who needs to file for the last couple of years. He did make all of his deposits (both checks and cash) into his checking account and he did buy all of his parts out of that same account (along with all his personal expenses). We’re using his deposits as his income and can total all the payments to the auto parts stores. He does not have records tracking the income and expenses to specific jobs. Where should I put the total parts expense on the Sch C?
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As long as he doesn't keep an inventory of parts, you should be able to just plug in the total cost of parts as supplies. Schedule C doesn't differentiate between the different jobs he did, as long as they're all the same occupation. You could work on a hundred cars over the course of the year and only file one schedule C. -
Auto Parts
cost of goods sold start with zero inventory end with zero inventory or if he has inventory then use that as ending inventory.I do a couple of auto mechanics and they keep no inventory
They have some parts on consignment oil filters spark plugs brake pads and some other small items.Comment
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I think either way would work fine, but I'd lean toward putting it in COGS with zero beginning & ending inventory. This would show a smaller Gross Profit on Sales, which just MIGHT yield a lower DIF score and slightly decrease the chances of an audit.Last edited by JohnH; 07-30-2009, 06:58 AM."The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
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Supplies or COG's
In my simple way of thinking items should go in the COG if they eventually end up with the customer, otherwise I put them in supplies.Comment
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See page 5-12 in
TTB.
Right hand column under "did you know?".Comment
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