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What category should I use for business expenses?

Rod F.

I've been working with Quicken Home, Business & Rental for a few years, but I'm still making mistakes. I've been working on my income taxes. I ran both the tax summary and itemized deductions reports. I expected to see things there like what I paid for my side business website, domain registration, training courses and subscriptions, etc. Several different things. However, none of that is coming up.

I started looking into categories in Quicken. That's when I realized the mistake I've made. I've been using the category "Business Expense: Unreimbursed Business Expense" for all of these. Looking more into those I now realize that's for things like my taking a course for my day job, paying for it myself, then my employer not reimbursing me for that expense. Things like "Business Expense: Unreimbursed Business Expense" is wrong for my side gig. And looking more into the categories in Quicken I now see why they're not showing up in any of those reports. In my Quicken the subcategory "Unreimbursed Business Expense" is not marked as a tax related category on the Tax Reporting tab, in the Edit Category popup dialog. I should do that in case my employer doesn't reimburse me for a business expense I pay for, but for now I'm concerned about 2020 income taxes. I think it would be smarter for me to create a new category/subcategory, then go to each of those instances for 2020 where I wrongfully entered it as a "Business Expense: Unreimbursed Business Expense", then change it to the new subcategory.

But what to call this new subcategory? What's an appropriate designation for it? Then from with the Edit Category dialog (or whatever might show up when creating a new category/subcategory) how do I handle the Tax related category checkbox? There's two radio buttons there, one labeled, "Standard line item list" and the other is "Extended line item list"?

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Accepted answers

NotACPA

Transactions ONLY appears on the Tax reports when the category it uses has a TAX related Tax line assigned to it.

SO, you can use, or create, any category that you want for these transactions ... but you MUST assign a tax line to them.

Take a look at your tax return for a year ago to help you decide what tax line to use.

To assign a tax line to a category, do TOOLS, Category List, click the very faint clock icon in the Action column to the right of the particular category, click EDIT and the Tax Reporting tab. Then scroll down thru the drop-down list of tax lines until you find the appropriate one for the particular category.

Repeat as needed.

volvogirl

Also.... I don't know what categories you would need but my husband is a Land Surveyor. Here's how I set mine up (I also put the Schedule C line number in as part of the name)

Survey Income

Survey Expenses

........11 Labor

........18 Office Expense

........20 Equip Rent

........22 Supplies

........24a Travel

........27 Other - Printing

........27 Other - Small Tools

I made the expenses sub-categories of the main Survey Expense category.

Also I use Tags for each job. Then when I run a report I can sort it by job. So an expense entry might look like this
Survey Expenses:22 Supplies/Maple Street

Here is a blank Schedule C to see what you need

http://www.irs.gov/pub/irs-pdf/f1040s...

All comments

NotACPA

Transactions ONLY appears on the Tax reports when the category it uses has a TAX related Tax line assigned to it.

SO, you can use, or create, any category that you want for these transactions ... but you MUST assign a tax line to them.

Take a look at your tax return for a year ago to help you decide what tax line to use.

Repeat as needed.

volvogirl

To be included in business reports (and I don't know where else) you have to assign the category to a schedule C tax line item number. To check the tax line assignment open the Category list by either clicking on the Category Icon or go to Tools-Category List or Ctrl+Shift+C. Then select the category and right click on it to Edit it. Click on the Tax Reporting Tab and check the box for Tax related and pick a Schedule C: tax line item.

volvogirl

Also.... I don't know what categories you would need but my husband is a Land Surveyor. Here's how I set mine up (I also put the Schedule C line number in as part of the name)

Survey Income

Survey Expenses

........11 Labor

........18 Office Expense

........20 Equip Rent

........22 Supplies

........24a Travel

........27 Other - Printing

........27 Other - Small Tools

I made the expenses sub-categories of the main Survey Expense category.

Also I use Tags for each job. Then when I run a report I can sort it by job. So an expense entry might look like this
Survey Expenses:22 Supplies/Maple Street

Here is a blank Schedule C to see what you need

http://www.irs.gov/pub/irs-pdf/f1040s...

Rod F.

Thank you @NotACPA and @volvogirl for your responses. Spending time in Quicken I realized I could create whatever subcategories I want there. I could call one "Cake" and another "Pie", then even within the category creation process make them both tax related. But when I'm entering expenses related to my side gig and especially when I'm doing my income taxes, I will be confused by subcategories "Cake" and "Pie". Better to produce subcategories that will make sense to me on a 1040 form. And thank you for the example, volvogirl from your husband's land surveyor business. That helps. I now have some additional questions, but there more TurboTax related, not Quicken. So, I'll ask the new questions in the TurboTax forums.

volvogirl

You could make Cake and Pie be Tags. Or if you are baking them you will probably enter the ingredients as Supplies for your tax return. Materials go under Supplies. Unless you are tracking Cost of Goods Sold and Inventory.

Rod F.

@volvogirl, I've seen "tags", but don't understand what their use case are. Your example says I could use "Cake" as a tag related to Supplies. But then what?

oldngrmpy1

The other thing you can do is create categories of whatever, but prefix them with an B for Business or S for Side gig. ie: B Advertising, then you could also use S Advertising. You could easily, search, sort or whatever. you could also just search for "Advertising" and get both and then sort to see them both. then you could apply tax line items to them.

volvogirl

Tags so you can sort a report by them.