Contract Labor and Cost of Goods Sold

[Bonnie]

On the schedule C under COGS can you list Contrat Labor that you are issuing 1099's for in this catagory? Or is this only for wages paid to employees? Specifically for a builder who is building residential homes and his inventory is the homes he builds. I have always put the cost of material in this section as well as the Subcontractors he hires to do the work. I was actually told to do this by someone at the IRS when I first began doing his tax return. Now something has come up that has made me question if this is correct or if the Contract Labor needs to go under expenses on the front of the Sch C.

[Snaggletooth]

You can

classify anything to Cost of Goods Sold if that's what it really is.

And for a contractor, subcontracts are in fact cost of goods sold.

The governance of whether a person is an employee or independent contractor is a separate issue from where his expense is listed.

[DaveinTexas]

On the schedule C under COGS can you list Contrat Labor that you are issuing 1099's for in this catagory? Or is this only for wages paid to employees? Specifically for a builder who is building residential homes and his inventory is the homes he builds. I have always put the cost of material in this section as well as the Subcontractors he hires to do the work. I was actually told to do this by someone at the IRS when I first began doing his tax return. Now something has come up that has made me question if this is correct or if the Contract Labor needs to go under expenses on the front of the Sch C.

I don't see a problem with this at all. A strange little side note: I put labor in the Cost of Goods Sold section on a return that was audited and the IRS auditor asked me how much in labor my client was claiming because it did not appear in their system. Apparently there was some glitch between our software and the IRS's computers; the auditor had no record of any labor being claimed at all!

[kpangelinan]

On the schedule C under COGS can you list Contrat Labor that you are issuing 1099's for in this catagory? Or is this only for wages paid to employees? Specifically for a builder who is building residential homes and his inventory is the homes he builds. I have always put the cost of material in this section as well as the Subcontractors he hires to do the work. I was actually told to do this by someone at the IRS when I first began doing his tax return. Now something has come up that has made me question if this is correct or if the Contract Labor needs to go under expenses on the front of the Sch C.

Yup, this sounds fine.