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Old 01-31-2012, 01:20 PM
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Question Income or not income, that is the question

I am working on the completion of my 2011 tax return. My husband has a sole proprietorship as he is a self employed contractor. I am really confused! The way he operates is that he gives his customer an estimate, if they accept, he receives a check for the material cost that he "estimated". Once the job is complete, my husband then receives a check for the labor cost that was quoted.

My question is whether I have to show the amount that he received for materials? If so, is there somewhere that I also am able to show the material costs? We are in a range of about $42,000 for the year in materials.

Thank you


Last edited by mrbittler : 01-31-2012 at 01:21 PM. Reason: wrong word


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Old 01-31-2012, 02:13 PM
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“My question is whether I have to show the amount that he received for materials? “----->I do NOT think so;actual costs(material expenses) spent need to be reported on his Sch C of 1040, NOT estimated costs .expenses.
“If so, is there somewhere that I also am able to show the material costs?”----->You need to report material costs on Sch C of 1040 line 22.



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Old 01-31-2012, 02:20 PM
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“I do NOT think so;actual costs(material expenses) spent need to be reported on his Sch C of 1040, NOT estimated costs .expenses."

So how do I tell the IRS that the "supplies" which were purchased by my husband were paid for by the homeowner?"

">You need to report material costs on Sch C of 1040 line 22."

It would be acceptable to put such a large number on line 22 of Schedule C?

Thank you for your help!


Last edited by mrbittler : 01-31-2012 at 02:24 PM.


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Old 01-31-2012, 02:32 PM
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“It would be acceptable to put such a large number on line 22 of Schedule C?”---->Of course; as long as they are actual costs incurred in the business as ACTUAL, NOT estimated/acrued material costs.However, as yo can see, if the business loss exceeds your total income for the year,I mean, your business may have NOL as long as the excess of business deductions over gross income in a particular tax year.Then, any unused portion of the loss, which is known in the tax laws as a net operating loss , can be used to offset income and reduce taxes in another year.As long as you have a loss and your business is organized as a sole proprietorship, you'll normally be able to deduct the loss from your total income from other business ventures or from any salary, wages, or other earnings.



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Old 01-31-2012, 02:56 PM
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Quote:
Originally Posted by Wnhough View Post
“It would be acceptable to put such a large number on line 22 of Schedule C?”---->Of course; as long as they are actual costs incurred in the business as ACTUAL, NOT estimated/acrued material costs.However, as yo can see, if the business loss exceeds your total income for the year,I mean, your business may have NOL as long as the excess of business deductions over gross income in a particular tax year.Then, any unused portion of the loss, which is known in the tax laws as a net operating loss , can be used to offset income and reduce taxes in another year.As long as you have a loss and your business is organized as a sole proprietorship, you'll normally be able to deduct the loss from your total income from other business ventures or from any salary, wages, or other earnings.
Okay, so do I put the money which was received by my husband from his "customers" for the material under gross receipts? Is it considered income? I guess what I'm really getting at is that I am worried that since he deposited the checks into his bank account, I want to be able to prove to the IRS that it was all spent on actual job expenses.

Thank you, again!



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Old 01-31-2012, 03:17 PM
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“ so do I put the money which was received by my husband from his "customers" for the material under gross receipts?”---->If your husband spends his own money on the material costs and be reimbursed by his customers, then the reimbursed material costs are NOT tax deductible; they are neither income nor deductible material costs. However, his customers may or may not need a 1099-MISC filed. For instance, assume you rhusband worked in a temporary office and required printer paper or other office supplies, and the company paid for those expenses. If your husband gave the company all of the receipts for the expenses, then the company does not need to include them in a 1099-MISC and it is NOT your husband’s income either)so your husband doesn’t need to report it on Sch C). However, if your husband kept those receipts, then the reimbursed expenses must be included on your husband’s 1099-MISC.
“ Is it considered income?”---->As described above;it depends.



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