I am a sole proprietor, I have an office in my home. I create/manufacture…

Hi,

Actually for a service business, cost of service might be a better term - but unless you are an S-Corp, the direct labor that's included in COGS doesn't incluse self employment income ... for sole proprietors, that's really profit

Now, if you had employees OR if you were an S-Corp and paid yourself a salary, it would be appropriate to include THIS as cost of goods sold

If you have no beginning and ending inventory, then COGS really doesn't apply

Many accountants will tell that that the term for a service business is "Cost of Revenue."

If you're profitable, yes... here's why...

After paying yourself a reasonable salary (which 1/2 of FICA is paid by you the employee and 1/2 is paid bu the s-corp AGAIN you) the profits over and above that are considered dividends and there's no self employment tax (both halves of FICA) charged against dividends

(doesn't really affect Federal INCOME tax, because the S-Corp will still pas everything through to you) but you'll save 15.3% on everything above your salary

Yep, in one form or another (you could form an LLC, usually very straightforward) and then file form 2553 with IRS to elect to be taxed as an S-Corp (THe LLC OR a corporation) will provide liability protction as well ... business creditors or lawsuits can only comes after your business assets and income ... insulates your personal assets and any other income frommattachment by lawsuits or creditors of the business

Your positive rating is thanks enough! :0)