pricing and taxing look simple - retail_price minus cost_of_materials equal profit from which I pay taxes BUT
how should I treat a few boards that used for soldering and testing (it will not be sold anywhere)?
it is not "inventory" anymore, right?
testing, profit and taxes
Moderators: adafruit_support_bill, adafruit
Forum rules
Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions!
Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions!
- Franklin97355
- Posts: 23910
- Joined: Mon Apr 21, 2008 2:33 pm
Re: testing, profit and taxes
That would be R&D and would be an expense.
-
- Posts: 76
- Joined: Sun Oct 04, 2009 9:41 pm
Re: testing, profit and taxes
Thanks!
What is appropriate way to document this?
So in case of an audit which piece of paper I should have to prove that it was used for testing?...
What is appropriate way to document this?
So in case of an audit which piece of paper I should have to prove that it was used for testing?...
-
- Posts: 164
- Joined: Fri Jun 11, 2010 9:21 pm
Re: testing, profit and taxes
I think you're going into too much detail. Profit = sales (plus stock on hand) less <all business expenditure>.
Unused/broken/test stuff is just a bit of expenditure that doesn't come back as sales, like all the other things you spend money on. No need to prove what every tiny bit of hardware was used for.
Unused/broken/test stuff is just a bit of expenditure that doesn't come back as sales, like all the other things you spend money on. No need to prove what every tiny bit of hardware was used for.
-
- Posts: 12151
- Joined: Thu Apr 06, 2006 4:21 pm
Re: testing, profit and taxes
these are good questions but they are really best answered by an accountant, depending on how you end up forming your company and paying taxes, your record keeping will vary
only an accountant will have the experience to give you the correct answers for tax and record-keeping questions!
only an accountant will have the experience to give you the correct answers for tax and record-keeping questions!
- lyndon
- Posts: 281
- Joined: Tue Mar 29, 2011 5:28 pm
Re: testing, profit and taxes
Like adafruit said, ask your accountant or tax specialist for specifics, but here is a very good IRS publication that should answer all those questions. http://www.irs.gov/pub/irs-pdf/p334.pdf
As an aside, if you do your own taxes now, it may be a good idea to get an Enrolled Agent (EA) to do your taxes for at least the first year you're in business. An EA can handle your small business taxes and you can learn enough from them to do it yourself from then on. I've used both an EA and a CPA and the only difference I noticed is that I wrote the CPA much larger checks.
As an aside, if you do your own taxes now, it may be a good idea to get an Enrolled Agent (EA) to do your taxes for at least the first year you're in business. An EA can handle your small business taxes and you can learn enough from them to do it yourself from then on. I've used both an EA and a CPA and the only difference I noticed is that I wrote the CPA much larger checks.
-
- Posts: 76
- Joined: Sun Oct 04, 2009 9:41 pm
Re: testing, profit and taxes
yea sure, every hobbyist must have personal accountant, tax adviser, lawyer and secretary
P.S. thanks for the link to the official IRS doc - it has some important info, but not everything that I need to know...
P.S. thanks for the link to the official IRS doc - it has some important info, but not everything that I need to know...
Forum rules
Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions!
Get help, and assist others in with open source kits and running a business! Do not ask for legal advice or for consulting services in this forum, only general biz questions!