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State tax online Index A Alien Resident, Resident alien. State tax online American Institute in Taiwan, U. State tax online S. State tax online employees of, American Institute in Taiwan. State tax online American Samoa, possession exclusion, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Apprentices, treaty benefits for, Common Benefits Assistance (see Tax help) B Binational social security agreements, Bilateral Social Security (Totalization) Agreements Blocked income, Blocked Income Bona fide residence test Defined, Bona Fide Residence Test First year, Bona fide resident for part of a year. State tax online Last year, Bona fide resident for part of a year. State tax online Meeting the requirements, Publication 54 - Additional Material Qualifying for, Bona fide residence. State tax online , Reassignment. State tax online Treaty provisions, Special agreements and treaties. State tax online Voting by absentee ballot, Effect of voting by absentee ballot. State tax online Waiver of time requirements, Waiver of Time Requirements, U. State tax online S. State tax online Travel Restrictions C Camps, foreign, Foreign camps. State tax online Carryover of housing deduction, Carryover. State tax online Change of address, Reminders Choosing the exclusion, Choosing the Exclusion, When You Can Choose the Exclusion Clergy, self-employment tax on, Members of the Clergy Community income, Community income. State tax online Competent authority assistance, Competent Authority Assistance Contributions To foreign charitable organizations, Contributions to Foreign Charitable Organizations To IRAs, Contributions to Individual Retirement Arrangements Conventions, income tax, Purpose of Tax Treaties Credit Earned income, Earned income credit. State tax online , Earned income credit. State tax online Foreign tax, Foreign tax credit. State tax online , Taxes of Foreign Countries and U. State tax online S. State tax online Possessions, Deduction for Other Foreign Taxes, Common Benefits Related to excluded income, Items Related to Excluded Income Currency Foreign, Foreign Currency D Deductions Contributions to foreign charitable organizations, Contributions to Foreign Charitable Organizations Foreign taxes, Taxes of Foreign Countries and U. State tax online S. State tax online Possessions, Deduction for Other Foreign Taxes, Common Benefits, Publication 54 - Additional Material Housing, foreign, Foreign Housing Deduction IRA contributions, Contributions to Individual Retirement Arrangements Moving expenses, Moving Expenses, Forms To File Related to excluded income, Items Related to Excluded Income Reporting, How To Report Deductions Dependents Exemption for, Exemptions, Publication 54 - Additional Material Individual taxpayer identification number (ITIN), Social security number. State tax online Social security number, Social security number. State tax online Deposit of foreign currency with disbursing officer, Deposit of foreign currency with disbursing officer. State tax online E Earned income Foreign, Foreign Earned Income, Foreign camps. State tax online , Publication 54 - Additional Material Source of, Source of Earned Income Types of, Earned and Unearned Income, Storage expense reimbursements. State tax online Earned income credit, Earned income credit. State tax online , Earned income credit. State tax online Employer-provided amounts, Employer-provided amounts. State tax online Estimated tax, Estimated Tax Exclusion Foreign earned income, Foreign Earned Income Exclusion, When You Can Choose the Exclusion Housing, Foreign Housing Exclusion, Choosing the exclusion. State tax online Meals and lodging, Exclusion of Meals and Lodging U. State tax online S. State tax online possessions, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Exemptions Dependents, Exemptions, Publication 54 - Additional Material Spouse, Exemptions, Publication 54 - Additional Material Extensions Filing income tax return, Extensions, Return filed before test is met. State tax online Meeting bona fide residence or physical presence test, Extension of time to meet tests. State tax online F Fellowships, Scholarships and fellowships. State tax online Figuring estimated tax on nonconvertible foreign income, Figuring estimated tax on nonconvertible foreign currency. State tax online Figuring U. State tax online S. State tax online income tax, Figuring actual tax. State tax online Filing information Estimated tax, Estimated Tax Filing requirements, Filing Requirements Nonresident spouse treated as resident, Nonresident Alien Spouse Treated as a Resident, Foreign earned income exclusion. State tax online Filing requirements By filing status, Filing Requirements Foreign currency, Foreign Currency When to file and pay, When To File and Pay, Return filed before test is met. State tax online , Publication 54 - Additional Material Where to file, Where To File, Publication 54 - Additional Material Foreign Camps, Foreign camps. State tax online Country, defined, Foreign Country Currency, Foreign Currency Earned income, Foreign Earned Income, Foreign camps. State tax online , Publication 54 - Additional Material Household, second, Second foreign household. State tax online Foreign currency, deposit with disbursing officer, Deposit of foreign currency with disbursing officer. State tax online Foreign earned income Defined, Foreign Earned Income, More information. State tax online U. State tax online S. State tax online Government employees, U. State tax online S. State tax online Government Employees, More information. State tax online Foreign earned income exclusion Choosing, Choosing the Exclusion, When You Can Choose the Exclusion Defined, Foreign Earned Income Exclusion Earned income credit, Earned income credit. State tax online Foreign tax credit, Foreign tax credit or deduction. State tax online Income received after year earned, Paid in year following work. State tax online , Example. State tax online Limit, Limit on Excludable Amount, Physical presence test. State tax online , Publication 54 - Additional Material Maximum exclusion, Limit on Excludable Amount, Physical presence test. State tax online Part-year exclusion, Part-year exclusion. State tax online Physical presence test, maximum exclusion, Physical presence test. State tax online Requirements, Who Qualifies for the Exclusions and the Deduction?, Foreign camps. State tax online Revoking choice, Revoking the Exclusion Foreign housing exclusion Earned income credit, Earned income credit. State tax online Foreign tax credit, Foreign tax credit or deduction. State tax online Foreign housing exclusion/deduction Carryover of deduction, Carryover. State tax online Deduction, figuring, Foreign Housing Deduction Exclusion, figuring, Foreign Housing Exclusion, Choosing the exclusion. State tax online Housing amount, Housing Amount Housing expenses, Housing expenses. State tax online Married couples, Married Couples Requirements, Who Qualifies for the Exclusions and the Deduction?, Foreign camps. State tax online Second foreign household, Second foreign household. State tax online Foreign tax credit Earned income exclusion, Foreign tax credit or deduction. State tax online , Foreign tax credit or deduction. State tax online Foreign taxes Credit for, Foreign tax credit. State tax online , Taxes of Foreign Countries and U. State tax online S. State tax online Possessions, Deduction for Other Foreign Taxes, Common Benefits Deduction for, Taxes of Foreign Countries and U. State tax online S. State tax online Possessions, Deduction for Other Foreign Taxes, Common Benefits, Publication 54 - Additional Material Paid on excluded income, Foreign taxes paid on excluded income. State tax online Form 1040-ES, Estimated Tax 1040X, Return filed before test is met. State tax online , How To Make the Choice 1116, Credit for Foreign Income Taxes 2032, Foreign affiliate. State tax online 2350, How to get an extension. State tax online 2555, Choosing the Exclusion, Form 2555 and Form 2555-EZ, Form 2555 2555-EZ, Choosing the Exclusion, Form 2555 and Form 2555-EZ, Form 2555 3115, Blocked Income 3903, Forms To File 4361, Members of the Clergy 4563, American Samoa. State tax online 4868, Automatic 6-month extension. State tax online 673, Statement. State tax online 8689, Non-USVI resident with USVI income. State tax online 8822, Reminders W-4, Foreign tax credit. State tax online Free tax services, Free help with your tax return. State tax online Frequently asked questions (FAQs), Publication 54 - Additional Material Fulbright grant, Fulbright Grant, Publication 54 - Additional Material G General tax questions, Publication 54 - Additional Material Green card test, Resident alien. State tax online Guam Possession exclusion, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residents of, Resident of Guam. State tax online Where to file, Resident of Guam. State tax online H Help (see Tax help) Housing Amount, Housing Amount, Self-employed and employer-provided amounts. State tax online Deduction, Foreign Housing Exclusion and Deduction, Foreign Housing Deduction Exclusion, Foreign Housing Exclusion and Deduction, Choosing the exclusion. State tax online Expenses, Housing expenses. State tax online I Income Apprentices, treaty benefits for, Common Benefits Artist, Income of an artist. State tax online Blocked, Blocked Income Community, Community income. State tax online Corporation, Income from a corporation. State tax online Earned, Foreign Earned Income, Foreign camps. State tax online , Publication 54 - Additional Material Employer's property or facilities, use of, Use of employer's property or facilities. State tax online Investment, treaty benefits for, Common Benefits Partnership, Income from a sole proprietorship or partnership. State tax online Pensions and annuities, Pensions and annuities. State tax online , Common Benefits Personal service, treaty benefits for, Common Benefits Professional fees, Professional fees. State tax online Professors, treaty benefits for, Common Benefits Railroad retirement benefits, Publication 54 - Additional Material Reimbursement of employee expenses, Reimbursement of employee expenses. State tax online Reimbursement of moving expenses, Reimbursement of moving expenses. State tax online Rental, Rental income. State tax online Royalties, Royalties. State tax online Social security benefits, Publication 54 - Additional Material Sole proprietorship, Income from a sole proprietorship or partnership. State tax online Source of, Source of Earned Income Stock options, Stock options. State tax online Students, treaty benefits for, Common Benefits Teachers, treaty benefits for, Common Benefits Trainees, treaty benefits for, Common Benefits Unearned, Earned and Unearned Income Indefinite assignment, Temporary or Indefinite Assignment Individual retirement arrangements (IRAs), Contributions to Individual Retirement Arrangements Individual taxpayer identification number (ITIN), Social security number. State tax online Investment income, treaty benefits for, Common Benefits IRAs, Contributions to Individual Retirement Arrangements L Limit on Foreign housing deduction, Limit Housing expenses, Limit on housing expenses. State tax online Income exclusion, Limit on Excludable Amount, Physical presence test. State tax online Lodging, exclusion of, Exclusion of Meals and Lodging M Married couples, Married Couples Meals and lodging, exclusion of, Exclusion of Meals and Lodging Moving Allocating expenses, Allocation of Moving Expenses Deducting expenses, Moving Expenses, Forms To File Reimbursement of expenses, Reimbursement of moving expenses. State tax online N Nonresident spouse Social security number, Social Security Number (SSN) Treated as resident, Nonresident Alien Spouse Treated as a Resident, Foreign earned income exclusion. State tax online Northern Mariana Islands Possession exclusion, American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residents of, Resident of the Commonwealth of the Northern Mariana Islands. State tax online Where to file, Resident of the Commonwealth of the Northern Mariana Islands. State tax online P Part-year exclusion, Part-year exclusion. State tax online Pay for personal services, Earned income. State tax online , Common Benefits Paying U. State tax online S. State tax online tax in foreign currency, Paying U. State tax online S. State tax online tax in foreign currency. State tax online Payment of tax, When To File and Pay Penalties and interest, Publication 54 - Additional Material Pensions and annuities Income from, Pensions and annuities. State tax online , Common Benefits Withholding from, Withholding from pension payments. State tax online Physical presence test 12-month period, How to figure the 12-month period. State tax online Defined, Physical Presence Test Maximum exclusion, Physical presence test. State tax online Meeting the requirements, Publication 54 - Additional Material Waiver of time requirements, Waiver of Time Requirements, U. State tax online S. State tax online Travel Restrictions Professors, treaty benefits for, Common Benefits Publications (see Tax help) Puerto Rico Possession exclusion, Puerto Rico and U. State tax online S. State tax online Virgin Islands Residents of, Puerto Rico. State tax online Q Questions and answers, Publication 54 - Additional Material R Railroad retirement benefits, Publication 54 - Additional Material Reimbursement Accountable plan, Accountable plan. State tax online Employee expenses, Reimbursement of employee expenses. State tax online Moving expenses, Reimbursement of moving expenses. State tax online Resident alien defined, Resident alien. State tax online Revoking choice to exclude, Revoking the Exclusion S Scholarship and fellowship grants, Publication 54 - Additional Material Scholarships, Scholarships and fellowships. State tax online Second foreign household, Second foreign household. State tax online , Married Couples Self-employment tax Clergy, Members of the Clergy Exemption from, Exemption From Social Security and Medicare Taxes How to pay, Publication 54 - Additional Material Who must pay, Who Must Pay Self-Employment Tax? Social security and Medicare taxes, Social Security and Medicare Taxes Social security benefits, Publication 54 - Additional Material Social security number Dependents, Social security number. State tax online Nonresident spouse, Social Security Number (SSN) Source of earned income, Source of Earned Income Spouse, exemption for, Exemptions, Publication 54 - Additional Material Students, treaty benefits for, Common Benefits Substantial presence test, Resident alien. State tax online T Taiwan, American Institute in, American Institute in Taiwan. State tax online Tax help, How To Get Tax Help Tax home, Tax Home in Foreign Country, Temporary or Indefinite Assignment Tax treaties Benefits of, Common Benefits, More information on treaties. State tax online Competent authority assistance, Competent Authority Assistance Determining residence, Special agreements and treaties. State tax online Obtaining copies of, Obtaining Copies of Tax Treaties Purpose of, Purpose of Tax Treaties Teachers, treaty benefits for, Common Benefits Temporary assignment, expenses, Temporary or Indefinite Assignment Totalization agreements, Bilateral Social Security (Totalization) Agreements Trainees, treaty benefits for, Common Benefits Travel restrictions, U. State tax online S. State tax online Travel Restrictions Treaties (see Tax treaties) TTY/TDD information, How To Get Tax Help U U. State tax online S. State tax online Government employees, U. State tax online S. State tax online Government Employees, More information. State tax online U. State tax online S. State tax online Virgin Islands Possession exclusion, Puerto Rico and U. State tax online S. State tax online Virgin Islands V Virgin Islands Nonresidents of, Non-USVI resident with USVI income. State tax online Residents of, Resident of U. State tax online S. State tax online Virgin Islands (USVI). State tax online Where to file, Resident of U. State tax online S. State tax online Virgin Islands (USVI). State tax online W Waiver of time requirements, Waiver of Time Requirements, U. State tax online S. State tax online Travel Restrictions When to file and pay, When To File and Pay, Return filed before test is met. State tax online , Publication 54 - Additional Material Where to file Claiming exclusion/deduction, Where To File Commonwealth of the Northern Mariana Islands residents, Resident of the Commonwealth of the Northern Mariana Islands. State tax online Guam residents, Resident of Guam. State tax online No legal residence in U. State tax online S. State tax online , Where To File Virgin Islands residents, nonresidents, Resident of U. State tax online S. State tax online Virgin Islands (USVI). State tax online Withholding Income tax, Income Tax Withholding , Publication 54 - Additional Material Pension payments, Withholding from pension payments. 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IRS Commissioner Addresses Nation's Taxpayers on 2014 Filing Season; YouTube Video Released

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Message to Taxpayers: English| Spanish| ASL

IR-2014-12, Feb. 10, 2014

WASHINGTON – The Internal Revenue Service today released a YouTube message from Commissioner John Koskinen to the nation's taxpayers providing tips and help for the 2014 filing season.

In the YouTube video, now available at IRS.gov and the IRS YouTube channel, Koskinen also discusses how the IRS and its employees will approach the 2014 tax season.

“I can assure you we are all dedicated to doing whatever we can to help you file your taxes this filing season,” Koskinen said in the video, which runs just under three minutes.

“We want to provide you with the assistance you need to get your taxes filed accurately and on time,” Koskinen added. “And we will work hard to issue refunds quickly while increasing our efforts to stop tax fraud and identity thieves.”

Koskinen also cautioned taxpayers that phone lines will be busy this year. “Given our very limited resources, our phone lines are going to be extremely busy this year – and there will frequently be extensive wait times,” Koskinen said. “We are working to limit these waiting times as much as possible, and I apologize that we can’t do more in that regard this year.”

As an alternative, he encouraged taxpayers to consider the following options:

  • Visit IRS.gov to find a wide range of information, including the Where’s My Refund? tool to check on tax refund status.
  • Download the newly redesigned IRS smartphone app IRS2Go to check on tax refund status and get the latest tax news and information, available in English and Spanish for Apple and Android devices.
  • Visit the IRS YouTube channel to get information from over a hundred short instructional IRS videos. IRS YouTube channels have been viewed more than 6 million times.

The IRS also offers subscription to daily tax tips during the filing season as well as other useful resources year-round through a variety of social media platforms such as Twitter, @IRSnews, @IRSenEspanol and @IRStaxpros, Facebook and Tumblr. For more IRS social media links, go to IRS Social Media.

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Page Last Reviewed or Updated: 10-Feb-2014

The State Tax Online

State tax online 6. State tax online   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. State tax online However, to determine these costs, you must value your inventory at the beginning and end of each tax year. State tax online 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. State tax online This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. State tax online 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. State tax online If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. State tax online For more information, see chapter 2. State tax online 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. State tax online These lines are reproduced below and are explained in the discussion that follows. State tax online 35 Inventory at beginning of year. State tax online If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. State tax online 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. State tax online Subtract line 41 from line 40. State tax online  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. State tax online 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). State tax online Opening inventory usually will be identical to the closing inventory of the year before. State tax online You must explain any difference in a schedule attached to your return. State tax online Donation of inventory. State tax online   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. State tax online 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. State tax online You must remove the amount of your contribution deduction from your opening inventory. State tax online It is not part of the cost of goods sold. State tax online   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. State tax online Treat the inventory's cost as you would ordinarily treat it under your method of accounting. State tax online For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. State tax online   A special rule may apply to certain donations of food inventory. State tax online See Publication 526, Charitable Contributions. State tax online Example 1. State tax online You are a calendar year taxpayer who uses an accrual method of accounting. State tax online In 2013, you contributed property from inventory to a church. State tax online It had a fair market value of $600. State tax online 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. State tax online The charitable contribution allowed for 2013 is $400 ($600 − $200). State tax online 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. State tax online The cost of goods sold you use in determining gross income for 2013 must not include the $400. State tax online You remove that amount from opening inventory for 2013. State tax online Example 2. State tax online 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. State tax online You would not be allowed any charitable contribution deduction for the contributed property. State tax online 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. State tax online If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. State tax online Trade discounts. State tax online   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. State tax online You must use the prices you pay (not the stated prices) in figuring your cost of purchases. State tax online Do not show the discount amount separately as an item in gross income. State tax online   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. State tax online Cash discounts. State tax online   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. State tax online There are two methods of accounting for cash discounts. State tax online You can either credit them to a separate discount account or deduct them from total purchases for the year. State tax online Whichever method you use, you must be consistent. State tax online If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. State tax online For more information, see Change in Accounting Method in chapter 2. State tax online   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. State tax online If you use this method, do not reduce your cost of goods sold by the cash discounts. State tax online Purchase returns and allowances. State tax online   You must deduct all returns and allowances from your total purchases during the year. State tax online Merchandise withdrawn from sale. State tax online   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. State tax online Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. State tax online You must also charge the amount to your drawing account. State tax online   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. State tax online As stated above, you also use it to record withdrawals of merchandise for personal or family use. State tax online This account is also known as a “withdrawals account” or “personal account. State tax online ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. State tax online Small merchandisers (wholesalers, retailers, etc. State tax online ) usually do not have labor costs that can properly be charged to cost of goods sold. State tax online 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. State tax online Direct labor. State tax online   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. State tax online 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. State tax online Indirect labor. State tax online   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. State tax online Other labor. State tax online   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. State tax online 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. State tax online Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. State tax online Those that are not used in the manufacturing process are treated as deferred charges. State tax online You deduct them as a business expense when you use them. State tax online Business expenses are discussed in chapter 8. State tax online 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. State tax online Containers. State tax online   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. State tax online If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. State tax online Freight-in. State tax online   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. State tax online Overhead expenses. State tax online   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. State tax online The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. State tax online 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. State tax online 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. State tax online Inventory at the end of the year is also known as closing or ending inventory. State tax online Your ending inventory will usually become the beginning inventory of your next tax year. State tax online 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. 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