Hi all,
I’m down to the last stretch on working on my taxes. At this point a
root canal looks more enticing.
On the inventory for precious metals, is there a rule of thumb for
pricing gold sheet, wire, etc. I bought gold at, gulp, $525 an ounce
and nearly had a heart attack. Of course now, its worth a bunch more
and I’m not sure how to report this back to the IRS.
Any suggestions?
Thanks,
Karen christians
On the inventory for precious metals, is there a rule of thumb for pricing gold sheet, wire, etc. I bought gold at, gulp, $525 an ounce and nearly had a heart attack. Of course now, its worth a bunch more and I'm not sure how to report this back to the IRS.
You have the choice of valuing inventory at either cost or current
value. Choose “cost” otherwise you have a profit on paper that is not
money you actually ever received. If you have inventory that was
purchased at a price that is much higher than current market, you can
do the opposite and value it on the books for a loss. Be careful. How
you value your inventory can make a big difference in the bottom
line.
You would inventory it at your cost, not replacement cost.
I bought gold from Hoover & Strong and they shipped in long boxes.
We bought 1 foot strips of everything. I wrote inside the lid of the
box the date, amount of metal bought and at what cost per ounce. It
gave me an idea. Then for inventory, I could average out cost per
ounce of wat was left to count.
David
David S. Geller
JewelerProfit.com
You ask your accountant what is the method you’ve used in the past
on schedule ‘C’. I am not an accountant but I don’t believe you
report
this. It all works out when you use the material in the manufacture
of product.
KPK
Report the value of your inventory at the price you paid for it.
It’s not worth a cent more or less until you actually sell it.
Larry
Cary NC
Karen:
I have always assumed that inventory was kept a cost. And when you
sell metal at a higher market you have to consider that profit. I
suppose you could buy new metal at market and sell it right away to
avoid having to take all the markup as profit.
I would sure like to hear a tax authority’s opinion on this.
Fred Sias
Check with your accountant, but, if you are on a cash accrual basis
(doesn’t mean you actually paid with cash) you use the price you paid
for the metal no matter what the market does, nor for how long you’ve
had it. This can get complicated when you have the same material
purchased at different prices in your inventory, but you are supposed
(lol) to keep track of it.
Dan
Fred,
I have always assumed that inventory was kept at cost. And when you sell metal at a higher market you have to consider that profit. I suppose you could buy new metal at market and sell it right away to avoid having to take all the markup as profit. I would sure like to hear a tax authority's opinion on this.
Although I seldom admit it, and haven’t practiced in many years, I
am a CPA. Both inventory and Cost of Goods Sold (COGS) are both based
on ‘cost…’ But there are several methods of computing ‘cost’ that
are acceptable for the IRS – FIFO, LIFO, Specific Identification,
and so on. Your description of selling the newest inventory soonest
and keeping the oldest is called LIFO (last in, first out). To use
this for tax purposes, the IRS requires you to file Form 970.
Specific Identification is typically used for something significant
and discrete, like autos or perhaps, precious gems… FIFO (first in,
first out) costing is used most frequently by businesses… One
important point is that once a business has used a method of
costingits inventory, it must apply to the IRS to change to another
method. In other words, the method you used last year is the one
that you ‘chose.’ Lastly, if you’re in business and not skilled as a
bookkeeper, hiring anaccountant to prepare your taxes is usually a
good investment. Disclaimer, don’t rely on this pseudo
professional!!!
Jamie
There are a coupla accounting methods. first in first out, last in
first out or some screwy schemes that I don’t quite grasp.
(FIFO and LIFO accounting - Wikipedia) try this for
a start and if you get it figured out let me know what the heck it
means in nuts and bolts.
I bought gold from Hoover & Strong and they shipped in long boxes. We bought 1 foot strips of everything. I wrote inside the lid of the box the date, amount of metal bought and at what cost per ounce. It gave me an idea. Then for inventory, I could average out cost per ounce of wat was left to count.
You be smaht. You mean I have to actually organize my metal storage?
Oh geez. At least I know when I purchased the gold, at what price and
which karat and manufacturer.
Root canal diverted!
k
I have always assumed that inventory was kept a cost. And when you sell metal at a higher market you have to consider that profit.
That was my assumption too. I just didn’t know if the tax laws had
changed. Good thing I bought all my gold long ago.
My CPA had mentioned that one of the key differences in the IRS
looking at artists was whether or not they reported inventory. It’s a
pain to count all those findings (actually I weigh them), my finished
goods, my unfinished goods and my in process goods.
Thanks Fred.
Karen Christians
My CPA had mentioned that one of the key differences in the IRS looking at artists was whether or not they reported inventory. It's a pain to count all those findings (actually I weigh them), my finished goods, my unfinished goods and my in process goods.
That’s why I have for years entered all findings as cost of goods
when received and just cost them off.
David
David S. Geller
JewelerProfit
Have you considered using an artist employment code for your taxes?
The whole business of inventory then becomes what have you made and
is in stock? If you only do made-to-order pieces and sell them as you
make them, you have no inventory.
It would simplify your taxes a lot.
Judy Hoch
Have you considered using an artist employment code for your taxes? The whole business of inventory then becomes what have you made and is in stock? If you only do made-to-order pieces and sell them as you make them, you have no inventory.
Please take care. The ‘artist employment code’ does not entitle a
business to do away with inventory accounting for tax purposes and
to write off your stock when purchased. The IRS allows a small
business exemption to inventory accounting for any type of businesses
with revenues under $1 million.
Hello Karen Christians,
It's a pain to count all those findings (actually I weigh them)...
Me too. One of the best reasons to have a good scale. When I receive
metals, before I put them into inventory, I take the time to
calculate both price/piece and price/gram. Makes inventory time a
little more bearable… but not much more!
Judy in Kansas, where we might see some more snow to end the month.
Something simple is being made into something complex. If you’re a
hobbyist it doesn’t make any difference; and if you’re a
professional you have a professional do your taxes.
KPK