Question

Where to deduct services you have paid for such as welding/anodizing done on merchandise you are selling

Forum|Forum|1 year ago
August 25, 2024
3 replies
0 views

I feel confident this is part of Costs of Goods sold. It is not "merchandise", but it is a service performed on the merchandise we sold.

I also am remembering that a 1099-NEC needs to be issued for services you pay for that exceed $600.

Thank you.

B

Bsch4477

Employee

Deduct on Schedule C line 11 contract labor.

A

Anonymous_

Employee

@danielle-51 wrote:

........it is a service performed on the merchandise we sold.

Who is "we"?

Is this a sole proprietorship, partnership, corporation? What type of business entity?

D

danielle-51Author

Sorry, "we" are an LLC, taxed as a partnership. So what does this mean? How do I account for this?

A

Anonymous_

Employee

@danielle-51 wrote:

Sorry, "we" are an LLC, taxed as a partnership. So what does this mean? How do I account for this?

I presume you're using TurboTax Business to prepare the 1065 for the LLC?

Click the FEDERAL TAXES tab, then Deductions, and then the Start button to the right of Cost of Goods Sold. You could enter the expense under Cost of Labor.

O

Opus 17

Employee

If this is part of the cost of making goods that will be kept in inventory past the end of the year, then you want it in COGS rather than another expense. Per @Anonymous_ , there is a place to enter labor costs as part of the cost of making your products. (Similar to, if you were selling clothes, and you buy fabric and then pay someone to sew it up, the labor is included in the cost of the product.)

For 1099-NEC, you are required to issue a 1099-NEC to any person or business to whom you pay more than $600 in the course of your business. But you do not have to issue a 1099-NEC if the business is an S- or C-corporation or an LLC that is being taxed as an S-corp. You should issue the vendor/subcontractor a W-9 form asking for their tax number. If the vendor believes that they are a type of business exempt from the 1099-NEC requirement, they will return the W-9 form signed but with the tax number blank. You can rely on the vendor's certification if they claim not to be subject to the 1099-NEC requirement. I have posted the W-9 and the 1099-NEC instructions below.

https://www.irs.gov/forms-pubs/about-form-w-9

https://www.irs.gov/instructions/i1099mec#en_US_202401_publink100044476