Is wages paid to workers who make the product part iii line 37 or line 26?

Wages of production workers go in Part III line 37; wages of office, sales and delivery staff who are not making the product go on line 26.

Is wages paid to workers who make the product part iii line 37 or line 11?

Part III line 37 is for employees doing production work; an outside contractor doing the same work is contract labor, and if the work produces inventory its cost belongs in Part III rather than on line 11.

Where do wages for production workers go? Part III line 37

Short answer Part III line 37 Part III line 37, cost of labor

Wages paid to workers who make the product belongs on Part III line 37, part iii line 37, cost of labor.

Why part iii line 37

If you make or assemble what you sell, the wages of the people doing the making are cost of labor in Part III line 37, not wages on line 26. They enter the return through cost of goods sold, which means they reduce gross profit rather than appearing as an operating expense. The split is by what the person does, not by who they are: a worker who spends part of the week on the bench and part on the counter is allocated between Part III and line 26. Only a business that produces or resells goods has a Part III at all, so a pure service business never uses line 37.

Log it once, with the line already on it. Type an expense in plain words in ClaryBook and it is filed with a date, vendor, amount and what it was for, so the number your preparer needs for wages paid to workers who make the product is already written down.

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What wages paid to workers who make the product is confused with

Line 26, wages: Wages of production workers go in Part III line 37; wages of office, sales and delivery staff who are not making the product go on line 26.
Line 11, contract labor: Part III line 37 is for employees doing production work; an outside contractor doing the same work is contract labor, and if the work produces inventory its cost belongs in Part III rather than on line 11.
Part III line 38, part iii line 38, materials and supplies: Line 37 is the labor that makes the goods; the raw materials and supplies that go into them are line 38, and both land in cost of goods sold.

Examples that belong on part iii line 37

$34,000 of bench wages at a furniture maker
$18,500 of kitchen wages at a bakery making what it sells
$7,200 of assembly wages at a small product business
$9,000 of a worker's $18,000 wages allocated to production and the rest to line 26
$12,400 of sewing wages at a clothing maker

What does not belong here

Production wages double counted on line 26 and in Part III.
Administrative and sales wages pushed into cost of labor.
Your own labor value, which is never a cost of goods sold item.
Production wages on line 26 by a business that keeps inventory.

The limit that applies

Reduces gross profit through cost of goods sold rather than appearing as an operating expense. Only businesses that make or resell goods complete Part III.

What to keep

Keep timesheets or job records that show production hours separately from other duties, because the allocation is the whole point and it has to come from a record rather than a guess. Keep the payroll register so the two parts add back to the filed wage totals.

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Sources

This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.

Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.

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