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  • When does depreciation begin on new manufacturing equipment?

    Short answer

    Generally, when the equipment is ready and available for its intended business use. The purchase date, payment date and operational readiness can differ. The deduction also depends on classification and applicable federal and state rules.

    Example

    Equipment delivered in December but requiring installation may have a different placed-in-service date.

    What to review

    Invoices, installation and readiness records, business use, financing and the depreciation method.

    Official source: www.irs.gov/publications/p946

  • Are all purchases by a Georgia manufacturer exempt from sales tax?

    Short answer

    No. Georgia provides exemptions for qualifying manufacturing purchases, but being a manufacturer does not make every purchase exempt. Equipment use, location and the specific exemption requirements matter.

    Example

    Production machinery and general office furniture should not automatically receive the same treatment.

    What to review

    Equipment descriptions, actual use, manufacturing location, invoices and the appropriate exemption certificate.

    Official source: dor.georgia.gov/taxes/sales-use-tax

  • Which costs belong in manufacturing inventory and cost of goods sold?

    Short answer

    Manufacturing costs generally include materials, production labor and allocable factory overhead. Selling and administrative expenses need separate classification. Tax capitalization rules and applicable exceptions must also be considered.

    Example

    Production-worker wages and factory costs may belong in product costs, while sales-office expenses require separate treatment.

    What to review

    Cost categories, payroll allocation, production records, work in process, finished goods and the adopted accounting method.

    Official source: www.irs.gov/publications/p538

  • Can a nonprofit owe income tax on business activities?

    Short answer

    Yes. A regularly conducted business that is not substantially related to the exempt purpose may create unrelated business income tax. Exceptions and exclusions can change the result.

    Example

    Using business profits to fund charitable work does not, by itself, make the activity related to the exempt purpose.

    What to review

    The activity, its frequency, relationship to the mission, revenue, expenses and applicable exceptions.

    Official source: www.irs.gov/charities-non-profits/unrelated-business-income-tax

  • How should a nonprofit track donor-restricted contributions?

    Short answer

    Keep records of the donor’s restrictions and track the related use of funds. Distinguish donor restrictions from funds the board has designated internally; they are different classifications.

    Example

    A contribution limited by the donor to a scholarship program should be traceable to that purpose. A board’s internal savings designation is not the same restriction.

    What to review

    Gift letters, grant agreements, spending records and board minutes.

    Official source: www.fasb.org/

  • Does a tax-exempt nonprofit still have to file an annual return?

    Short answer

    Often, yes. The required Form 990-series return or notice depends on the organization’s classification and financial circumstances. Exceptions apply, including for certain churches and church-affiliated organizations.

    Example

    State nonprofit incorporation alone does not establish which federal filings apply.

    What to review

    IRS determination documents, organization type, revenue, assets and filing history. Employment-tax obligations should be reviewed separately.

    Official source: www.irs.gov/charities-non-profits/annual-exempt-organization-return-who-must-file

  • Does selling beauty products to a salon make the sale tax-exempt?

    Short answer

    No. Business use and resale are different. Products a salon resells may qualify for a documented resale exemption; products it consumes while providing services generally require a different tax treatment.

    Example

    Shampoo sold unopened to a customer differs from shampoo used during a salon service.

    What to review

    Intended use, exemption documentation and the rules where the sale occurs.

  • How should a beauty supply store document damaged or missing inventory?

    Short answer

    Investigate and document the difference before adjusting the books. Record the items, quantities, costs, dates and reason for the adjustment. The tax treatment depends on the inventory method and facts.

    Example

    A store removes damaged products from sale. Keep a list and supporting records rather than writing off an estimated retail selling price.

    What to review

    Physical counts, purchase invoices, returns, disposal records and inventory adjustments. Avoid counting the same cost twice.

    Official source: www.irs.gov/publications/p334

  • Why do my POS sales differ from my bank deposits or Form 1099-K?

    Short answer

    The reports may measure different amounts. POS records show store transactions, bank deposits reflect settlements, and Form 1099-K reports gross payment transactions before certain adjustments.

    Example

    Processor fees, refunds and settlement timing can explain why a bank deposit is lower than recorded card activity.

    What to review

    POS totals, cash sales, merchant statements, refunds, fees and Form 1099-K. Reconcile the reports rather than adding them together as separate income.

    Official source: www.irs.gov/businesses/understanding-your-form-1099-k

  • Can a wholesaler deduct all inventory purchases immediately?

    Short answer

    Do not assume every inventory purchase is immediately deductible. The timing depends on the business’s accounting method and applicable inventory rules. Some qualifying small businesses have alternative methods, but their records must still clearly reflect income.

    Example

    Buying additional merchandise in December does not, by itself, establish a December tax deduction.

    What to review

    The current inventory method, year-end quantities, purchase records and whether a proposed change requires an accounting-method change.

    Official source: www.irs.gov/publications/p538