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Filing Amended Tax Returns

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Filing Amended Tax Returns

Filing amended tax returns 3. Filing amended tax returns   Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. Filing amended tax returns Traditional IRA mistakenly moved to SIMPLE IRA. Filing amended tax returns When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). Filing amended tax returns It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. Filing amended tax returns Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). Filing amended tax returns This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. Filing amended tax returns See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. Filing amended tax returns If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. Filing amended tax returns See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. Filing amended tax returns What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. Filing amended tax returns See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. Filing amended tax returns A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. Filing amended tax returns These contributions are called salary reduction contributions. Filing amended tax returns All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. Filing amended tax returns The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. Filing amended tax returns Contributions are made on behalf of eligible employees. Filing amended tax returns (See Eligible Employees below. Filing amended tax returns ) Contributions are also subject to various limits. Filing amended tax returns (See How Much Can Be Contributed on Your Behalf , later. Filing amended tax returns ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. Filing amended tax returns See How Are Contributions Made , later. Filing amended tax returns You may be able to claim a credit for contributions to your SIMPLE plan. Filing amended tax returns For more information, see chapter 4. Filing amended tax returns Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. Filing amended tax returns Self-employed individual. Filing amended tax returns   For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. Filing amended tax returns Excludable employees. Filing amended tax returns   Your employer can exclude the following employees from participating in the SIMPLE plan. Filing amended tax returns Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). Filing amended tax returns Employees who are nonresident aliens and received no earned income from sources within the United States. Filing amended tax returns Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. Filing amended tax returns Compensation. Filing amended tax returns   For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. Filing amended tax returns Wages, tips, and other pay from your employer that is subject to income tax withholding. Filing amended tax returns Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. Filing amended tax returns Self-employed individual compensation. Filing amended tax returns   For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. Filing amended tax returns   For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. Filing amended tax returns How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. Filing amended tax returns They are made on your behalf by your employer. Filing amended tax returns Your employer must also make either matching contributions or nonelective contributions. Filing amended tax returns Salary reduction contributions. Filing amended tax returns   During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). Filing amended tax returns You can choose to cancel the election at any time during the year. Filing amended tax returns   Salary reduction contributions are also referred to as “elective deferrals. Filing amended tax returns ”   Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. Filing amended tax returns Matching contributions. Filing amended tax returns   Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. Filing amended tax returns See How Much Can Be Contributed on Your Behalf below. Filing amended tax returns These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. Filing amended tax returns These contributions are referred to as matching contributions. Filing amended tax returns   Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. Filing amended tax returns Nonelective contributions. Filing amended tax returns   Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. Filing amended tax returns These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. Filing amended tax returns   One of the requirements your employer must satisfy is notifying the employees that the election was made. Filing amended tax returns For other requirements that your employer must satisfy, see chapter 3 of Publication 560. Filing amended tax returns How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. Filing amended tax returns Salary reduction contributions limit. Filing amended tax returns   Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. Filing amended tax returns The limitation remains at $12,000 for 2014. Filing amended tax returns If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. Filing amended tax returns You, not your employer, are responsible for monitoring compliance with these limits. Filing amended tax returns Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. Filing amended tax returns The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. Filing amended tax returns $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. Filing amended tax returns The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. Filing amended tax returns The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. Filing amended tax returns Matching employer contributions limit. Filing amended tax returns   Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. Filing amended tax returns These matching contributions cannot be more than 3% of your compensation for the calendar year. Filing amended tax returns See Matching contributions less than 3% below. Filing amended tax returns Example 1. Filing amended tax returns In 2013, Joshua was a participant in his employer's SIMPLE plan. Filing amended tax returns His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). Filing amended tax returns Instead of taking it all in cash, Joshua elected to have 12. Filing amended tax returns 5% of his weekly pay ($100) contributed to his SIMPLE IRA. Filing amended tax returns For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. Filing amended tax returns Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. Filing amended tax returns Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). Filing amended tax returns Example 2. Filing amended tax returns Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. Filing amended tax returns 94% of his weekly pay contributed to his SIMPLE IRA. Filing amended tax returns In this example, Joshua's salary reduction contributions for the year (2. Filing amended tax returns 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). Filing amended tax returns Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. Filing amended tax returns In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. Filing amended tax returns Matching contributions less than 3%. Filing amended tax returns   Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. Filing amended tax returns   For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. Filing amended tax returns If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. Filing amended tax returns Nonelective employer contributions limit. Filing amended tax returns   If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. Filing amended tax returns For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. Filing amended tax returns   Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. Filing amended tax returns Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. Filing amended tax returns This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. Filing amended tax returns Example 3. Filing amended tax returns Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. Filing amended tax returns Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. Filing amended tax returns In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). Filing amended tax returns Traditional IRA mistakenly moved to SIMPLE IRA. Filing amended tax returns   If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. Filing amended tax returns For more information, see Recharacterizations in chapter 1. Filing amended tax returns Recharacterizing employer contributions. Filing amended tax returns   You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. Filing amended tax returns SEPs are discussed in chapter 2 of Publication 560. Filing amended tax returns SIMPLE plans are discussed in this chapter. Filing amended tax returns Converting from a SIMPLE IRA. Filing amended tax returns   Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . Filing amended tax returns    However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. Filing amended tax returns When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. Filing amended tax returns These rules are discussed in chapter 1. Filing amended tax returns Your employer cannot restrict you from taking distributions from a SIMPLE IRA. Filing amended tax returns Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. Filing amended tax returns If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. Filing amended tax returns See Additional Tax on Early Distributions, later. Filing amended tax returns Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. Filing amended tax returns Two-year rule. Filing amended tax returns   To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. Filing amended tax returns The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. Filing amended tax returns   After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). Filing amended tax returns Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. Filing amended tax returns If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. Filing amended tax returns If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. Filing amended tax returns Prev  Up  Next   Home   More Online Publications
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The Filing Amended Tax Returns

Filing amended tax returns 6. Filing amended tax returns   How To Figure Cost of Goods Sold Table of Contents Introduction Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line 42 Cost of Goods Sold Introduction If you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. Filing amended tax returns However, to determine these costs, you must value your inventory at the beginning and end of each tax year. Filing amended tax returns This chapter applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income. Filing amended tax returns This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. Filing amended tax returns However, if you work in a personal service business and also sell or charge for the materials and supplies normally used in your business, this chapter applies to you. Filing amended tax returns If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. Filing amended tax returns For more information, see chapter 2. Filing amended tax returns Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42 Figure your cost of goods sold by filling out lines 35 through 42 of Schedule C. Filing amended tax returns These lines are reproduced below and are explained in the discussion that follows. Filing amended tax returns 35 Inventory at beginning of year. Filing amended tax returns If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. Filing amended tax returns Do not include any amounts paid to yourself   38 Materials and supplies   39 Other costs   40 Add lines 35 through 39   41 Inventory at end of year   42 Cost of goods sold. Filing amended tax returns Subtract line 41 from line 40. Filing amended tax returns  Enter the result here and on line 4   Line 35 Inventory at Beginning of Year If you are a merchant, beginning inventory is the cost of merchandise on hand at the beginning of the year that you will sell to customers. Filing amended tax returns If you are a manufacturer or producer, it includes the total cost of raw materials, work in process, finished goods, and materials and supplies used in manufacturing the goods (see Inventories in chapter 2). Filing amended tax returns Opening inventory usually will be identical to the closing inventory of the year before. Filing amended tax returns You must explain any difference in a schedule attached to your return. Filing amended tax returns Donation of inventory. Filing amended tax returns   If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. Filing amended tax returns The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. Filing amended tax returns You must remove the amount of your contribution deduction from your opening inventory. Filing amended tax returns It is not part of the cost of goods sold. Filing amended tax returns   If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Filing amended tax returns Treat the inventory's cost as you would ordinarily treat it under your method of accounting. Filing amended tax returns For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. Filing amended tax returns   A special rule may apply to certain donations of food inventory. Filing amended tax returns See Publication 526, Charitable Contributions. Filing amended tax returns Example 1. Filing amended tax returns You are a calendar year taxpayer who uses an accrual method of accounting. Filing amended tax returns In 2013, you contributed property from inventory to a church. Filing amended tax returns It had a fair market value of $600. Filing amended tax returns The closing inventory at the end of 2012 properly included $400 of costs due to the acquisition of the property, and in 2012, you properly deducted $50 of administrative and other expenses attributable to the property as business expenses. Filing amended tax returns The charitable contribution allowed for 2013 is $400 ($600 − $200). Filing amended tax returns The $200 is the amount that would be ordinary income if you had sold the contributed inventory at fair market value on the date of the gift. Filing amended tax returns The cost of goods sold you use in determining gross income for 2013 must not include the $400. Filing amended tax returns You remove that amount from opening inventory for 2013. Filing amended tax returns Example 2. Filing amended tax returns If, in Example 1, you acquired the contributed property in 2013 at a cost of $400, you would include the $400 cost of the property in figuring the cost of goods sold for 2013 and deduct the $50 of administrative and other expenses attributable to the property for that year. Filing amended tax returns You would not be allowed any charitable contribution deduction for the contributed property. Filing amended tax returns Line 36 Purchases Less Cost of Items Withdrawn for Personal Use If you are a merchant, use the cost of all merchandise you bought for sale. Filing amended tax returns If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. Filing amended tax returns Trade discounts. Filing amended tax returns   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. Filing amended tax returns You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Filing amended tax returns Do not show the discount amount separately as an item in gross income. Filing amended tax returns   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. Filing amended tax returns Cash discounts. Filing amended tax returns   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. Filing amended tax returns There are two methods of accounting for cash discounts. Filing amended tax returns You can either credit them to a separate discount account or deduct them from total purchases for the year. Filing amended tax returns Whichever method you use, you must be consistent. Filing amended tax returns If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. Filing amended tax returns For more information, see Change in Accounting Method in chapter 2. Filing amended tax returns   If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. Filing amended tax returns If you use this method, do not reduce your cost of goods sold by the cash discounts. Filing amended tax returns Purchase returns and allowances. Filing amended tax returns   You must deduct all returns and allowances from your total purchases during the year. Filing amended tax returns Merchandise withdrawn from sale. Filing amended tax returns   If you withdraw merchandise for your personal or family use, you must exclude this cost from the total amount of merchandise you bought for sale. Filing amended tax returns Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. Filing amended tax returns You must also charge the amount to your drawing account. Filing amended tax returns   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. Filing amended tax returns As stated above, you also use it to record withdrawals of merchandise for personal or family use. Filing amended tax returns This account is also known as a “withdrawals account” or “personal account. Filing amended tax returns ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. Filing amended tax returns Small merchandisers (wholesalers, retailers, etc. Filing amended tax returns ) usually do not have labor costs that can properly be charged to cost of goods sold. Filing amended tax returns In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product. Filing amended tax returns Direct labor. Filing amended tax returns   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. Filing amended tax returns They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages. Filing amended tax returns Indirect labor. Filing amended tax returns   Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process. Filing amended tax returns Other labor. Filing amended tax returns   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. Filing amended tax returns Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs. Filing amended tax returns Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. Filing amended tax returns Those that are not used in the manufacturing process are treated as deferred charges. Filing amended tax returns You deduct them as a business expense when you use them. Filing amended tax returns Business expenses are discussed in chapter 8. Filing amended tax returns Line 39 Other Costs Examples of other costs incurred in a manufacturing or mining process that you charge to your cost of goods sold are as follows. Filing amended tax returns Containers. Filing amended tax returns   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. Filing amended tax returns If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. Filing amended tax returns Freight-in. Filing amended tax returns   Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of cost of goods sold. Filing amended tax returns Overhead expenses. Filing amended tax returns   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. Filing amended tax returns The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. Filing amended tax returns Line 40 Add Lines 35 through 39 The total of lines 35 through 39 equals the cost of the goods available for sale during the year. Filing amended tax returns Line 41 Inventory at End of Year Subtract the value of your closing inventory (including, as appropriate, the allocable parts of the cost of raw materials and supplies, direct labor, and overhead expenses) from line 40. Filing amended tax returns Inventory at the end of the year is also known as closing or ending inventory. Filing amended tax returns Your ending inventory will usually become the beginning inventory of your next tax year. Filing amended tax returns Line 42 Cost of Goods Sold When you subtract your closing inventory (inventory at the end of the year) from the cost of goods available for sale, the remainder is your cost of goods sold during the tax year. Filing amended tax returns Prev  Up  Next   Home   More Online Publications