Crafts Inventory and Taxes

Dear Rich: I have been making crafts for gifts for many years. Over the years I have accumulated much inventory, including several sewing machines, yards of various fabrics and ribbons, etc. I have recently decided to start a business selling on etsy.com. When doing my taxes, how do I claim the existing inventory accumulated over the last 20 years, much of what I will use in my new business? WARNING! Entry may cause drowsiness. Do not read while driving.
Right, you had a question. Short answer: You probably can't count your 20 years of supplies as inventory unless you have incorporated those materials in finished (and unsold) works or works in progress.
The Basic Inventory Rules.  Inventory includes completed but unsold crafts work, raw materials used to create the crafts work, crafts works in process and certain supplies that become part of your crafts work. In other words it's all the stuff you've created that's unsold as well as all of the direct costs to make that stuff. The IRS wants you to calculate your inventory value (or "cost of goods") at the beginning and ending of each tax year. These costs include:

• the money spent on materials that become an integral part of the finished product, or materials consumed in the manufacturing process and are identified with the crafts goods
• the money spent on labor associated with each crafts items -- payments for employees, contractors, payroll taxes, etc.
• indirect costs necessary for production of each item other than direct production costs. (You may not have any of these unless you can calculate things like variable and fixed overhead expenses).

If you don't know how to calculate the direct costs of materials and labor for your goods, there's an explanation in our book for crafts artists as well as the explanation in this IRS circular.
Can you deduct 20-year old ribbon and fabrics? Although we talked about raw materials as part of the inventory, the IRS position seems to be that only finished (or partly finished) merchandise should be included in inventory. According to Code of Federal Reg. 1.471.1, raw materials and supplies should only be included in inventory to the extent that the goods have been acquired for sale or will physically be part of the merchandise intended for sale. So, unless your past purchases are incorporated in finished works or works in progress, they should not be counted as inventory. 

What about sewing machines and other equipment? Sewing machines and other equipment used in production are considered to be long-term assets (assets with a useful life of more than one year). They can be deducted in one year under Section 179, or they can be depreciated.

When tax time arrives ... you may want to consult a tax expert, at least for the first year you calculate inventory. Your beginning inventory for subsequent years will be your ending inventory for the previous year.

A Little Bug Picnic Birthday

Chloe's birthday week celebrations have wrapped up and we had a fabulous time! We managed to squeeze around 40 adults, kids, and babies into our humble abode on Saturday. It was so much fun, and actually felt quite cozy though people and toys were EVERYWHERE.

Here's some pics from the two parties. Unfortunately, we were so busy getting food together and meeting and greeting that I missed taking some shots like a pic of the loot box goodies, more pics of the birthday girl with guests, and a family photo (argh). I'm sure you parents can relate.

Chloe's invitations really got everyone in the mood for a "little bug picnic". A sign greeted guests at the door and we invited the wee ones to "Come bee a bug!" by wearing one of the bumble bee headbands.

There were lots of buggy decor details, like the DIY ladybug banner, the bug and bee straw toppers, and the beehive drink dispenser (filled with ice tea "beetle juice"). The loot boxes contained some plush bean bag bugs, "Buzz-bles!" labelled bubbles, insect finger puppets, magnifying glasses, and tattoos.

Activities with the kiddos were a bit of a hit and miss. I made a little photo booth and managed to get solo pics of each of the Nanny kids but the birthday girl was having none of that :( And then there was the DIY frog cutout for the bean bag toss game. I found a frog pic online and HandyMan printed it, mounted it on a piece of 1/4" MDF, and cut it out with a jigsaw. He then made slightly angled 1/4" cuts into two pieces of scrap wood to hold it up. It was pretty cute... most of the kids liked tossing the bean bag bugs into the froggy's mouth... and then the cutout turned into an impromptu photo cutout!

Then there was the cake!!

I wanted a small cake for candle blowing and was surprised by my mom and aunt with THE MOST adorable cake I had ever seen. The cake was made by Gladycakes. Glady is my aunt's goddaughter and I had asked too late to make the cake and unfortunately she was already booked up. I was resigned to getting a store bought cake but I told my mom my dilemma and unbeknownst to me she called my aunt and my aunt convinced Glady to make the cake! So thanks to her Lolas (or "grandmothers), Chloe got a little bug picnic cake. I loved all the cute details - the picnic blanket, the grapes, the ants! - and it went perfect with my itty bitty bunting.

The rest of the table was set with bug-themed food: Snails 'n cheese (baked mac 'n cheese), ladybug cupcakes, striped bumble bee jello, caterpillar kebobs (balled fruit on skewers). And guests got to take home a little treat too, scones in gingham bags.

So that was the party. I know it might seem a bit overdone, but the smiles on Chloe and all her little friends made it worth it :)

Sources:
Straw toppers, stripey straws, paper cups, wooden spoons and forks, gingham bags: Fort and Field
Sugar ladybug decorations, gingham cupcake liners: Sweet Estelle
Cake: Gladycakes
Beehive drink dispenser: Pier 1
Gable boxes, cupcake stand, blackboard signs: CreativeBag

*****

And for my friends in the Greater Toronto Area, I have some leftover/reusable party decorations I'd hate to go to waste. There's some edible sugar ladybugs (good for at least the next three months), straw toppers, some DIY and store-bought felt headbands, a Happy Birthday banner, and ladybug decor. Its like a bug birthday in a box!

If you're interested, write to me at ramblingrenovators@gmail.com. First person to email gets it. Pick up only please. 

Becoming A Bee

For Chloe's little bug picnic birthday, I've made some bumble bee headbands. They're super easy to make look awfully cute on the wee ones. First, get some styrofoam balls at the dollar store. Stick them on toothpicks and spraypaint them whatever colour you want. 

Get some kid-sized headbands too (not pictured). The ones I found were sparkly and pink so I sprayed them black. Gather up the rest of your materials: the painted balls, craft glue, and pipe cleaners.

Wrap the pipe cleaner around one finger, leaving a three-inch length on one side.

Put some glue on the spiral end.

Stick the ball on the spiral end and wrap the long end around the headband. Do the same with the other antenna.

Find the nearest little bug and have them begrudgingly model your masterpiece :)

Party Planning: Itty Bitty Bunting

Nothing says "party" like bunting. I love bunting and I still enjoy the bunting I made for Chloe's 1st birthday that we now have strung up in her room. For this birthday, I wanted to have some of the mini-bunting you see in my inspiration post (#2). Isn't it adorable? Totally a DIY project, I think.

I started off with some fabric tape from boqinana, baker's twine from Knot and Bow, and two wooden barbeque skewers.

First step was to cut 2-inch pieces of the fabric tape and fold them in half. Then I took the paper backing off the tape. Starting about 8 inches in from the end of the twine (I wanted enough twine to wrap around the skewer plus some extra), I placed the twine along the middle of the fabric tape. Fold the tape over the twine to create a little flag. Cut the bottom of the flag into a V shape. Repeat, leaving about 1/2 cm between fabric flags. Et voila, a little bunting fit for a birthday cake.

Or in this case, some banana bread.

And speaking of birthday, here's the soon-to-be two-year-old herself. This was her weekend morning outfit - winter hat, crazy scraggly hair at the back of her head (it looks like that EVERY morning!), training underwear, stained pajama top, and no pants. I especially enjoyed the lion imitation. It doesn't get much better than this :)

Be My Valentine

When did this happen? When did I become the mom of a toddler who brings home artwork, can babble her teachers' names, and has to bring Valentine cards for all her daycare friends? I swear she was a drooling, crawling little baby just yesterday!

But no, now I find myself at the dining table surrounded by her my first little 'school project'. This is one of those things they don't tell you as a new parent. What's the etiquette for Valentines cards? Chocolate or no chocolate? Handmade or store-bought? When I was a kid, cards came in a box and had perforated edges and cartoon images of doggies and kitty cats on them. Somehow, I feel like I need to do more than that (oh gosh, I sound like a 'stage' mom already!). So who does "more" better than Martha, which is where I got this idea:

I took a vacation photo of Chloe, photoshopped it up, and printed it on these leftover tent cards from our wedding. Is there anything cuter than chubby-cheeked profiles of little kids? I think not. Then I added some foil wrapped chocolate hearts, packed them in little bags, and taped it to the cards. First school project done. Do I get an A for effort?

*****

If you're still looking for some Valentine's ideas, here's some great ones here, here, here, and here.

Krafts with Kids

When I was young, I remember being so excited to help my mom decorate the house for Christmas. I felt like such a big girl, putting ornaments on the tree, placing tinsel icicles (remember those!) on the branches just so. My favourite part was spraying faux snow on the windows. That was always my job.

This Christmas being Chloe's first where she can really experience the season, I was intent on starting to make some holiday memories for her. So we tried to do some crafts. First, we tried to make some pom poms. Big disaster. I tried a simple finger knit pom pom making method, but Chloe wouldn't let me wrap the yarn around her fingers, and when I finally did get a pom pom made she would start to pull out all the individual strings. I threw in the towel and used the rejected pom poms as part of my sideboard decor.


Then we tried to create this pretty paper garland. A 19-month old can operate a hole punch, right? Sure... so long as that 19-month old will sit down longer than the 17.8 seconds that Chloe typically sits. Another failure.

Finally, with the help of Grandma, I found a craft that Chloe would actually like doing. With two big sheets of craft paper and her new paints, the kid went to town. She created these masterpieces.


And I used those masterpieces to wrap gifts for Lisa's lovely children. And I used those hole punched circles for the tags.



And we finally got one holiday craft done, under the tree, and stored in the little one's memory bank. Yay!

Tell me, what holiday traditions do you have with your kids?

Chloe's Party: Love Notes!

Chloe will turn 1 in 3 days - 3 days!! - and her party is next weekend so I've been busy getting my craft on.

I'll be the first to admit that sometimes I go a little, um, overboard with the party details. I swear the sickness started with our wedding 3 years ago - but that's what happens when you have a year-long engagement to plan the biggest party of your life... you end up spending too much time on projects like these and these. I find it so much fun though, to come up with a theme, to find all the bits and pieces to make your vision come alive, to use your hands and creativity. I know that Chloe is much too young to appreciate all this effort but I'm hoping somehow a little bit of this party will burrow itself into her long-term memory (and if not, I will have hundreds of photos to help her recall the day!).

Speaking of photos, I have taken thousands of photos of Chloe over the past year. I wanted a way to display them at her party so her guests could see how she's grown over the past year. But I also wanted to incorporate them into something special, something that Chloe could enjoy too when she gets older. So I've made up these notecards, 3 to 4 cards for each of Chloe's birthdays from age 2 to 18. I'll be asking each of the guests to pick a card and write a little note to Chloe. I think it will be a fun tradition... each birthday, Chloe will get to read some cards and see not only how she looked as a baby but also read the sweet messages from her friends and family and see what they dreamed for her future.


This was pretty easy to put together. Using an old canvas my brother painted years ago (he no longer wanted it and we were going to donate it to Goodwill so someone else could enjoy it), I covered the frame in some fabric. I used thumbtacks to attach the fabric to the wood. Then I strung ribbon across the fabric and also held that in place with thumbtacks. I made the notecards in Photoshop and found the cute flowered clothespins at the dollar store.



So pretty. And more importantly, nice little memories of Chloe's special day.

Party Planning: Pretty Petals

Cough, cough, sniffle, dribble. That's the sound of both HandyMan and Chloe feeling sick this week :( So, the chair makeover isn't quite done yet. But in between making pots of tea and nursing a poor sick little girl, I've managed to work a bit more on things for Chloe's party.

Most of you thought the invite looked better with Chloe's face, but I just loved the idea of incorporating a silhouette somehow so I managed to come up with another way to use it - and save some money while I'm at it!

Did I mention that I have to send out about 30 invitations? Yeah, I come from a large Filipino family. Add in Chloe's baby friends and their parents, and my best girlfriends who I've known for 25 years and their babies and you get a loooong list of invites! Good thing we're only doing a big party for her first birthday (next year, the kid will have to be content with a homemade cake for 3, lol). So I'm trying to keep costs down and make any 'extras' cost effective. Bouncing around blogland the other night, I came across some free downloads at I Still Love You blog. She had a petal envelope - perfect! Here's what I did with it:


I pasted the invite image directly on the petal envelope template - envelope and invite all in one! And to keep the envelope closed, I created this sticker which acts as a return address label. Here's a closer look at the mock up:



I printed these out on Avery 8293 Small Round Labels which I got at Staples. They come in a pack of 400 so I have a few more ideas on where else to use them. Only downside is now I have to cut out 30 petal envelopes. Oh, the things I do for this little girl! ;)