Tax Time!

 It's been a bunch of years now since I retired and had to file taxes. I did it one year just because the rumor/news mill claimed one had to file to be sure you got your covid relief checks. But it was so much simpler then.

For one thing, I no longer had to fool with Schedules C and SE. I'm back fighting with C again, and this time I mean fighting. I sold enough jewelry last year to "earn" a 1099. It's not that I haven't decades of experiences with them. It's that it was in a different kind of job and the company I contracted with held annual meetings where tax stuff for our business was explained in great detail, from keeping receipts and mileage logs to everything you could and couldn't claim as a deduction. By the last few years I was driving, the mileage deduction was up so high that I practically owed nothing. But it was simple. Really.

Now, not so much. First, no help with the changes except a dragged out struggle with the instructions. What exactly does "_____" mean to them? Does it mean this thing or that other thing? My biggest challenge of that type right now is picking a category for my kind of self employment. I make jewelry. There isn't something exactly like than in manufacturing. It gets sold at a retail level, on commission. But is it misleading to let the IRS think I run a store? The club runs the store. Everything is there on consignment. I can't find a matching category or concept to latch onto. Somehow I have to decide which wrong category is the least wrong. Even art categories are more performance art than manufacturing art.

Then there's the idea of maintaining an inventory. No way that works in the usual way. I do this as a hobby, for the joy of it. Much of what I make I give away as presents. There are a lot of things lying around waiting for use by being transformed from, say, a length of wire, into a chain for wearing or or sale. So far as I am concerned, all that stuff never even makes it into my inventory until it sells. All the rest is fun stuff. Not business. I don't depreciate things, stockpile things, they just wait for my fancy to fall on them again for whatever reason. Copper and sterling is still copper and sterling many years hence, and if untouched, is still just as ready to be used as ever.

Yes, I keep all my receipts. But what part of them goes into what I make for sale? The only time that comes into play is when they are finished and I put a price on them. How to do that was a big question my first few times, but I was given a formula I've followed ever since. We buy wholesale from the club supply room. For those items, double the price paid. If silver, say, was bought by weight, then the finished product (if it is only silver) gets weighed, priced, and that doubled. If there is a very large amount of work in something, more can be added, especially if you have no intention of actually making a sale by overvaluing yourself. You've already gotten the pleasure of doing it, the activity of keeping hands busy, the stimulus of creativity. For stones, or beads, etc, they get charged double my cost. Occasionally I forget weighing the metal separately in some combined finished product, but there is a simple solution. There is always another bead or nearly identical stone around, just because there always is. Weigh that, take that weight off to get the cost of the metal, and go from there. Price it at whole dollar amounts. like $18 instead of $17.50, and no ridiculous 99 cents in there.We are old folk, and pricing gets the KISS method for the store. Too many customers can't add other than even dollar amounts while they plan how much they can spend. We've been around long enough to not be fooled into thinking a penny off means anything except more numbers to try to remember. It's not an actual discount.

With that method of pricing everything, my costs can always be figured out easily from my commissions. The club takes 20%.  Sales tax got charged and paid by the club but it's never a part of the 1099 info we see and not our headache. That means my 80% check amount first gets the missing 20% added back on to bring up my total charged price, then that is cut in half to get my costs, my original cost starting point. Take that off my total check and the missing 30% is actual profit.  It saves a lot of piddly bookkeeping. Just simple math at the end of the year, and only this last year was it needed. (I guess I should be proud this is progress?)

Do I fear an audit? Well, it depends on whether the IRS thinks my low jewelry income on top of modest Social Security and a bit of interest is worth their time. I have to crunch more numbers to even find out if I'll have to pay self employment tax. I know for sure the grand total falls below the taxable total income for this pair of old geezers filing jointly. By the time I figure in the cost of using the club facilities for my hobby, I might even fall under their minimum for Schedule SE. But yes, I keep ALL my receipts. They fill a grocery store shopping bag. Got into that habit many years ago. It's one of the reasons I love to shop with plastic. Do they want to fight through them and try to pick my brain for whether and how much of any particular one contributed to a particular sale?  Or whether it's still lying around in miscellaneous boxes and totes and bags ready to get put to use? Were those particular beads practically free from somebody's garage sale years ago? When I bought that organizer that came with beads in each compartment, all for the price of the organizer, and kept maybe half of them to use someday, does that inspire the need to dig through an audit? 

The only thing I see raising an eyebrow will be all the zeros in all the irrelevant boxes on the forms. Like I said, nothing enters my inventory until it goes to be sold. There are no car expenses. No office expenses - the club supplies everything. No depreciation of tools and manufacturing equipment because - you guessed it - the club deals with those. No energy costs because - again - the club picks it up, and what they don't, the Rec Centers organization does for the facility itself. I can't use either until I pay both sets of fees, easily recorded costs to deduct, especially since this is my only club so it all goes there. (Do I count that as membership fees, or have to loop it all into building overhead costs since that's what it covers, along with training and all the other headaches a "real" retail business deals with?) There's no actual labor cost because we're all obligated to a certain number of hours of volunteer time in the club. Occasionally I buy my own small hand tools, but you might recall I'm the person who repurposed an old screwdriver (phillips) to wind wire around to make jump rings, and when I was done, it was "decommissioned" into a screwdriver again. I've put a turkey baster and pill bottles to similar use in shaping earring wires. I teach my skills to others for free, just like I was taught and still am.

But I've spent enough time kvetching about taxes instead of working on them. It's time for bed so my math brain can wake up ready to deal with some of this fun again. Good thing tax deadline day isn't the 15th any more.