This Tip Will Not Only Save You on Your Taxes, It Will Make Your Store Healthier

STORE OWNERS OFTEN ask me how to lower their “taxable income” in QuickBooks so they can legally pay less income tax. Many jewelers look for more expenses to lower their income tax, and yes, expenses do that. But the bookkeeper probably already booked those.

Here’s one tip: When a jeweler takes inventory, they always find a list of items that they can’t find. The item was sold and wasn’t put in the POS system, stolen, misplaced, taken apart, stepped on and ruined, etc. Removing these missing items from your inventory lowers your inventory value, which lowers the bottom line and thus your taxable income.

But there’s another gold mine of tax deductions waiting for you. A good jewelry store turns inventory once every 12 months. But let’s give it a little leeway. Let’s fire inventory over 18 months old. Doesn’t matter if you think it’s pretty or “someone will buy it”; the truth is nobody bought it and chances are if it’s 18 months old, it will still be in your showcase four or five years later.

I spoke to a jeweler who had over $700,000 of inventory, and easily over $250,000 was over 18 months old. His taxable income was almost $475,000 — but following the steps I outline below would bring his taxable income down to about $225,000. If this sounds like you, go into your POS program, find the items over 18 months old and do the following:

1. Pull them from the case or that box in the safe.
2. In your POS program, either mark them “missing” or “scrap them.”
3. This will decrease clutter in the showcase. History has shown if you have less items in the case, sales will increase, time to sell a customer decreases and average sale increases.
4. In QuickBooks, your inventory total will now be lower and “expenses” will increase, thus lowering taxable income.

You’re going to take inventory in 2022 but will backdate it to December 2021 (it’s legal) and do the same to these scrapped inventory items. Because the expense will be in 2021, when you receive the checks from refiners and dealers, the income will be in 2022.

Now really get rid of this stuff! There are plenty of refiners who will buy your scrap and return the stones to you. Small stones can now be used for repairs and custom. Sell multi-stone pieces and other jewelry to dealers who will buy them and send you money overnight.

Send me an email if you need a list of companies who will buy your stuff.

Now you can lower your debt in the store, maybe give yourself and staff bonuses, and have a higher checking account balance.