Where put shipping postage on 1099k Schedule C?

[webeyeon]

Check attached screenshots for Schedule C

Need confirmations from your guys if following deductions are categorized correctly on Schedule C?

Thank you in advance!

(1) eBay returns/PayPal refund: Part I - Income, Line 2: Returns and allowances

(2) eBay/PayPal fees: Part II - Expenses, Line 10: Commissions and fees

(3) Shipping materials like boxes, bubble wrappers: Line 22 Supplies (not included in Part III) .(or listed under Line 27a Other expenses? not sure???)

(4) Shipping postage: Line 27a Other expenses or Line 48?

(5) I paid a guy for QA/testing/repair service. Where to list this deduction? If I put it on Part III - Cost of Goods Sold. Line 37 Cost of labor, Seems I have to send IRS a form 1099 MISC for how much I paid this guy? However I am an individual, not a company. I don't have this guy's SSN and I don't think he will give me. I doubt I will be able to send out 1099 MISC for IRS to check against if this guy really reported this income.
Or can I put it on Part II - Expenses, Line 21: Repairs and maintenance? Or I list it on Line 27a Other expenses or Line 48?

(6) I have loss in damaged merchandise in shipping, defective item that's not repairable and won't be replaced by my supplier. Where should I put this?

BTW, do any deductions listed in "Other expense" will increase the probability of audit?

[nobody*s_perfect]

The IRS Instructions for Scheudule C say that postage goes on line 18.

[galfamtwo]

you can down load the instructions from IRS -- I am pretty good with taxes but I would not take my word for where things go.  It worth the money to have a cpa do my taxes 

[pro-tablet]

I remember some one has posted he put postage on "other expenses". The instructions say "Line 18:Include on this line your expenses for office supplies and postage."    --- In my understanding the word "postage" here may only refer to letters sent by an office.

[pro-tablet]

I did checked all instructions by IRS 

Instructions for Schedule C   Business Expenses   Tax Guide for Small Business

Still need confirmations from eBayers who had filing experience in the past.

[mam98031]

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@nobody*s_perfect wrote:

The IRS Instructions for Scheudule C say that postage goes on line 18.

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Postage and shipping expenses are two different things.  Postage is typically consider the stamps an office might use to mail out their business letters, payment, etc.

Shipping costs are what the OP is looking for.

Shipping costs and shipping supplies are part of Cost of Goods Sold [COGS].  They are direct expenses associated with selling whatever it is that you sell.

[nobody*s_perfect]

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@mam98031 wrote:

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 ... Shipping costs and shipping supplies are part of Cost of Goods Sold [COGS].  They are direct expenses associated with selling whatever it is that you sell.

Packaging materials and shipping/postage are not part of the goods that you are selling, they are operating expenses.

I've been filing Schedule C almost every year since 1976.  I have been audited 4 times by the feds and 4 times by my State for various reasons, and nobody has ever questioned anything on my Schedule C.  I suspect that it really doesn't matter which line you put it on since as you can see on the form, it all gets added together for line 28.

[cargo11]

Mine goes on Part V - and never had a problem.

[ted_200]

My eBay deal isn't a Sch. C activity, but I file if for another enterprise.  I put postage costs on Line 48 too, they haven't complained so far.  I handle the other things as they are shown on the form ^^^ too... eBay/PayPal fees (Line 10), and shipping boxes (Line 22)...

[pro-tablet]

Thank you for you guys and expecting more answers showing your past experience.

So shipping supplies like boxes, bubble wrappers go to  Line 22 Supplies (not included in Part III) ,or Line 18 Office expense, or Line 27a Other expenses? 

[mam98031]

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@nobody*s_perfect wrote:

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@mam98031 wrote:

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 ... Shipping costs and shipping supplies are part of Cost of Goods Sold [COGS].  They are direct expenses associated with selling whatever it is that you sell.

Packaging materials and shipping/postage are not part of the goods that you are selling, they are operating expenses.

I've been filing Schedule C almost every year since 1976.  I have been audited 4 times by the feds and 4 times by my State for various reasons, and nobody has ever questioned anything on my Schedule C.  I suspect that it really doesn't matter which line you put it on since as you can see on the form, it all gets added together for line 28.

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No they aren't.  Anything that can be directly contributed to the COGS, which shipping cost can, belong in COGS.  Just because you have been doing it for years doesn't mean it is right, it just means you've been doing it for years.

Shipping supplies are also consider COGS which is why you don't have to pay sales tax on shipping supplies when you purchase them.

But I think you are right, it doesn't matter much.  All IRS really cares about is that the end result is correct.

[lacemaker3]

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@mam98031 wrote:

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@nobody*s_perfect wrote:

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@mam98031 wrote:

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 ... Shipping costs and shipping supplies are part of Cost of Goods Sold [COGS].  They are direct expenses associated with selling whatever it is that you sell.

Packaging materials and shipping/postage are not part of the goods that you are selling, they are operating expenses.

I've been filing Schedule C almost every year since 1976.  I have been audited 4 times by the feds and 4 times by my State for various reasons, and nobody has ever questioned anything on my Schedule C.  I suspect that it really doesn't matter which line you put it on since as you can see on the form, it all gets added together for line 28.

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No they aren't.  Anything that can be directly contributed to the COGS, which shipping cost can, belong in COGS.  Just because you have been doing it for years doesn't mean it is right, it just means you've been doing it for years.

Shipping supplies are also consider COGS which is why you don't have to pay sales tax on shipping supplies when you purchase them.

But I think you are right, it doesn't matter much.  All IRS really cares about is that the end result is correct.

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I believe that @nobody*s_perfect is correct, although as stated, it won't change the bottom line.

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Cost of Goods Sold and the Tax Gap | Internal Revenue Service

...

Materials and Supplies

Include the cost of materials and supplies, such as hardware and chemicals, used directly or indirectly in manufacturing goods as part of cost of goods sold. Treat those materials and supplies not used in the manufacturing process as business expenses and deduct them as business expenses at the time of consumption.

 ...

This page is designated as historical and is no longer updated. Page Last Reviewed or Updated: 27-Sep-2017

I doubt that the official definion or correct accounting practices for how to account for shipping expenses has changed since this page was last updated.

[mam98031]

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@lacemaker3 wrote:

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@mam98031 wrote:

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@nobody*s_perfect wrote:

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@mam98031 wrote:

---

 ... Shipping costs and shipping supplies are part of Cost of Goods Sold [COGS].  They are direct expenses associated with selling whatever it is that you sell.

Packaging materials and shipping/postage are not part of the goods that you are selling, they are operating expenses.

I've been filing Schedule C almost every year since 1976.  I have been audited 4 times by the feds and 4 times by my State for various reasons, and nobody has ever questioned anything on my Schedule C.  I suspect that it really doesn't matter which line you put it on since as you can see on the form, it all gets added together for line 28.

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No they aren't.  Anything that can be directly contributed to the COGS, which shipping cost can, belong in COGS.  Just because you have been doing it for years doesn't mean it is right, it just means you've been doing it for years.

Shipping supplies are also consider COGS which is why you don't have to pay sales tax on shipping supplies when you purchase them.

But I think you are right, it doesn't matter much.  All IRS really cares about is that the end result is correct.

---

I believe that @nobody*s_perfect is correct, although as stated, it won't change the bottom line.

---

Cost of Goods Sold and the Tax Gap | Internal Revenue Service

...

Materials and Supplies

Include the cost of materials and supplies, such as hardware and chemicals, used directly or indirectly in manufacturing goods as part of cost of goods sold. Treat those materials and supplies not used in the manufacturing process as business expenses and deduct them as business expenses at the time of consumption.

 ...

This page is designated as historical and is no longer updated. Page Last Reviewed or Updated: 27-Sep-2017

I doubt that the official definion or correct accounting practices for how to account for shipping expenses has changed since this page was last updated.

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Shipping Charges are NOT a supply, it is a direct expense that can be contributed to a specific item or items sold.

As for the Shipping supplies.  Yes, accounting for these in Indirect Costs is appropriate as it is difficult to contribute or account for a specific amount of supplies directly to a specific item or items.

For purposes of the IRS forms, they care that the end result is proper.  So if someone miscategorizes and expense, it will not be the end of the world as long as it is accounted for.  You do not have to be an accountant or familiar with GAAP to file your taxes nor does IRS expect it.

[lacemaker3]

As @nobody*s_perfect said, shipping and packaging supplies are not part of the COGS, they are business expenses. But as stated, it probably doesn't make a difference to the bottom line.

https://www.irs.gov/publications/p334#en_US_2017_publink1000313467

Publication 334 (2017), Tax Guide for Small Business

(For Individuals Who Use Schedule C or C-EZ)

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 Details for lines 38 & 39:

[pro-tablet]

Can any one give a clue where better to shipping boxes/wrappers:

put here: Part II  Expenses - 22  Supplies (not included in Part III)

Or put here:  22 Part V - Other Expenses

I include IRS instructions here:

Line 22 (I don't quite understand what the word "incidental " mean? )
In most cases, you can deduct the cost of materials and supplies only to the extent you actually consumed and used them in your business during the tax year (unless you deducted them in a prior tax year).  However, if you had incidental materials and supplies on hand for which you kept no inventories or records of use, you can deduct the cost of those you actually purchased during the tax year, provided that method clearly reflects income. You can also deduct the cost of books, professional instruments, equip-ment, etc., if you normally use them within a year. However, if their useful-ness extends substantially beyond a year, you must generally recover their costs through depreciation.