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Thanks to both of you, Steve & Mike. Very helpful information – I appreciate your time in answering.
sonia,
Just record a refund of $100. Then pretend you bought another $10 item, and record that as an inventory purchase. That will bring your inventory up another $10. t-satt’s journal entries are correct, but for your purposes, just pretend you spent $10 cash on the item. That should work out in your bookkeeping scheme, I think.
To look at it from a different perspective, suppose that the item had broken in transit, and you refunded the buyer’s money without getting anything back. Then you purchased a completely different $10 item. Those two transactions together would have cost you $110 out of your pocket. With the transaction you currently have, you get the same net outcome ($100 refund, $10 new inventory) but only have to pay $100 to get it. Maybe it makes sense that way?
hi sonia,
Yes to #1, no to #2. Your 2018 transaction is: you added $10 of inventory and refunded $100. So if you think of it mathematically, your net refund is… -$100 refund + $10 inventory addition = -$90 refund.
It works because you didn’t actually spend $10 cash money for that $10 worth of inventory…that’s where you effectively get your $10 back out of the $100. Hopefully that makes sense and doesn’t just muddy the waters.
I think it’s “fatte a mano” which is handmade in Italian. But can’t help with the brand.
Maybe it helps to think of it this way…in December 2017, you made $90 profit. When you refund the $100 in January 2018, you are really giving back your $90 profit, and buying the item back for its original $10 cost. So now you put that item back in your inventory in 2018 at $10. Yes, there are 2 deductions, but you effectively paid for them item twice.
This is mostly meant, I think, for those people who “find” items of significant value, like gold doubloons buried in their backyard, etc. (hence the “treasure trove” reference). If you find a nice pair of shoes in the trash and re-sell them for a profit, you are being taxed on the profit, so the IRS is satisfied. I guess you could technically report them as income at whatever value they’re worth, and then your offset would be that you made no profit on them when you sold. The net tax effect is the same but it’s a weird way to do things. If you find a nice jacket and keep it for yourself, yeah, that’s technically “income”, I suppose, since you got something for nothing, but the IRS really does not care as the value is de minimis. If, on the other hand, you found $10K in the pocket of that jacket, then yes, in a perfect IRS world, you should report that on your tax return as income.
Yeah, the cynic in me says that it is intentionally confusing. Good idea about calling for clarification…I’d be glad to be wrong because then it would be a good deal.
BrianB, I also got this offer and my reading of the “fine print” is that the discounted promotional rate is only good for the first month. If you don’t cancel within that period, you continued to be charged for a year at the regular monthly rate (and if you cancel sometime within that year, early withdrawal penalties apply). So all you really save is $29.95 for one month.
That’s my understanding. I also forgot to say earlier, this reduces your taxable income, but it’s not going to reduce your self-employment income for the purposes of SE tax.
Thought I’d weigh in on the 20% taxable income reduction Jay talked about, since I just attended a webinar yesterday that discussed this.
This deduction is called the “qualified business income deduction”. The general way it works is that starting in 2018, you will get a deduction against taxable income equivalent to the lesser of:
a) 20% of “combined qualified business income”, which very generally means your aggregated income and losses from wholly owned and passthrough businesses (sole proprietorships, LLCs, partnerships, S Corps). Any business losses carried forward from prior years need to be included.
b) 20% of your TAXABLE income, not including capital gains and losses.
So to give a very simplistic example, let’s say I am a W-2 wage earner with a side ebay business. My total taxable income for 2018 (currently this is line 43 on the 1040) is $60K. My net income from ebay (sole proprietorship) is $10K of that. I have no carryforward losses or capital gains/losses. So my deduction will be the lesser of ($60K x 20% = $12K) OR ($10K x 20% = $2K). So in this scenario, my qualified business income deduction will be $2K, reducing my taxable income to $58K.
This deduction is against taxable income…it doesn’t reduce your adjusted gross income (AGI), which is the number that many limitations are calculated on. Also, there are some limitations on this deduction that kick in at higher levels of income that you should be aware of if you are in that situation.
I think the general idea with this deduction was to give some parity with the decrease in tax rates for C corporations. As Jay says, it certainly wasn’t done with an eye towards simplifying the tax code.
This is intended as general information only and is not meant to be construed as giving advice on your individual tax situation.
OK, I can’t link to the image, but if you google this, the mark is quite similar:
Sevres Porcelain Mark – Foecy
Foecy (France – Cher) Founded in 1898 by: Louis Lourioux
Used: 2Oth century
Foecy produced tablewares as well as art porcelain in imitation of Sèvres porcelain.
DoublyThumbs, so sorry to hear about your disaster. Make sure you keep good records about whatever you can’t salvage and any expenses you pay to clean/repair/rebuild the items or storage/packing area, and talk to your tax person about a possible business casualty loss. It won’t really compensate for the lost income, but it might help you a bit at tax time.
To weigh in on the perfume and matches shipping issue: this is the official USPS position as noted on their website:
Perfume containing alcohol may not be shipped internationally or mailed domestically using air transportation. Perfume containing alcohol, however, may be shipped within the United States by ground transportation. [Note, there is a link to shipping flammable/combustible materials on this page, but it appears to take you to the wrong hazard class. When you do find the correct hazard class, you quickly go down a rabbit hold of flashpoints, etc. The answer seems to be, make sure it can’t break or leak, and label it as ORM-D on the outside. If it were me, I would wrap it in bubble wrap and put it in a ziploc with something absorbent like shredded newspaper…that way any leakage should be contained if it does occur. Perhaps this is overkill, but in a former job I shipped hazardous materials so I guess I’m cautious.]
Safety Matches
Safety matches have treated match heads that will only ignite when struck against a specially prepared surface like a match book, card, or box. Safety matches may be shipped domestically using ground transportation. Safety matches may not be sent by air or mailed internationally. [Note, there is a link to packaging instructions for safety matches on this page.]
Strike-Anywhere Matches
Strike–anywhere matches will light from friction against any surface. Strike-anywhere matches may not be mailed domestically or internationally.
https://www.usps.com/ship/shipping-restrictions.htm
It does not surprise me that some of the USPS’ own employees don’t know the rules…many organizations seem to have this problem.
