OT-tax's? supplies or maint and repair?

supplies, repairs? parts you buy, or have on hand, and cleaners, bolts, tools, etc. Are they supposed to be listed as supplies or repairs and maintenance? I always hate tax time.

If you use 'em, they're repairs.

If you have 'em on hand in case you need 'em, they're supplies.

Dave,

It might not be right, but I write off miscellaneous supplies as expense when I buy them. I suppose if I bought a large quantity of some supply, I might list it as a supply and then expense the stuff off as I used it, but for normal operation, it isn't worth it to me to put it onto the Balance Sheet first and then move it to the P&L later.

YMMV.

Tom in TN

IRS doesn't care much about "expensed" items, so long as you are consistent, and you don't try to "expense" what should obviously be a capital item, and depreciated.

I usually list anything I specifically buy to repair something as "Repairs", and "Supplies" are nuts and bolts to replenish the little bins, nails, cleaning solution, sandpaper, etc.

Really doesn"t matter- they are all legitimate expenses in the year of purchase. MN Farm Account book has a double entry page for that- main column and multiple other columns with various headings....some blank to make your own categories. Just bought my 40th copy for this year"s records. If you maintain computer records, like Finpac or? I"m sure it can be set up the same way. Main advantage is for enterprise analysis. I use some blank columns for tracking expense (repair) records for individual main tractors, truck, combine, etc. Larger expenses like equipment, tires, engine overhauls, are listed on Purchases page and can be expensed under section 179, or depreciated. I certainly wouldn"t waste the time to track year to year inventory of shop supplies. Besides, if you are on the cash acctg system, instead of accrual, you wouldn"t even do that for crop inventory. Year end purchases of next year"s seed, fert, feed, small stuff is advisable for tax reasons....certainly not inventoried unless you are on accrual.

I generally throw it all under repair and maintainance. I put things like baler twine under supplies.

I am not a tax advisor, but just a farmer who has done his own taxes for more than 40 years.

So here is my take on this question. I don't think it makes much difference which catagory you put the questionable item(s) into. Both catagories are fully deductable in the same manner. IRS auditors may have a personal preference for how you do it, but the bottom line is that neither catagory gives you or them any $$ difference. When they audit, they are first looking for evidence of fraud, and then to see that you follow the rules for depreciation vs expensing off some major item (which can be done under the Section 179 rules, and can be a very good advantage to the taxpayer).

So my own interpretation is that consummed items which go out the door as "product" and need cost items to make that product saleable goes under "supplies". Examples are baler twine and parts used to repair someone else's equipment if you do any of that. But any items purchased to repair and maintain my own equipment goes under "repairs". If you buy bulk bolts and nuts some for immediate use in repairing some piece of equipment, and then toss the rest into a bin for future repairs, then all goes under the "repair" catagory. But if you are buying the same bulk order of bolts for the production of some item you produce "for sale", then those bolts are "supplies".

The repair catagory is a wide range of deductable items. If you take your haybine to the dealer for annual service, and end up with a $1500 bill for repairs, new sickle teeth, new belts, a dozen teeth for the reel, and a full set of rock guards. So you deduct the entire bill as a "repair". But if you have your own shop, and do the same work in your shop, then you have maybe $500 in parts, and some cost in welding gas (for cutting rusted bolts), some cost for the air wrench and compressor, some cost for the hand tools, etc. So when I buy a new replacement air wrench or replacement hand tools, or welding gas, it goes into the "repairs" at the time it is bought. So in fact my "repairs" costs are higher than my cost just for the parts, but probably much less than the cost for having the dealer do the job in his shop. But be careful to NOT declare your time value (in $$) for the work you have just done on that haybine. If you deduct say $700 for your own labor, then you need to be prepared to declare that same labor as a miscellaneous income elsewhere on the 1040, and that probably becomes a disadvantage to you.

I have stood for many audits in the late 70's and 80's, but there was never any question about the way I allocate my cost items to either "repairs" or "supplies". But they sure liked to mess with the depreciation schedules as to whether an item was a 3, 5, or 20 year item. The rules for depreciation are goofy, and even 2 different IRS auditors may not agree on how to handle a specific item.

Best of luck in getting it done!

Paul in MN

If you are manufacturing a product or repairing a customers items, you list the supplies as anything you purchased that went into that product. Anything that you used yourself to maintain your business is listed as repairs and maintenance. I list tools separate from either. Things such as soap used the restroom, brooms, window cleaners etc., I list as Shop/Clean Expenses. Then anything you stock as inventory to manufacture you have to inventory at the end of the year and subtract that dollar amount from what you are declaring as a supplies expense. You start with an inventory amount from the previous year and compare it with the inventory of the end of the next year. If you had less inventory you add to the amount of the supplies. If you had more inventory you subtract from the supplies expense. If you have just started a business in 2011 you subtract 100% of the inventory left at the end of the year from the supplies and carry the expense into 2012. The inventory is looked at like cash. They look at it like you just took cash out of your wallet and put it on a shelf. Until a customer gets it you can't write off the expense. Lot of work huh.

Inventory - Wikipedia, the free encyclopediaen.wikipedia.org/wiki/Inventory

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