2018 Turbotax Home and Business, under Business Income & Expenses has the category, "Inventory/Cost of Goods Sold." It asks you if you have inventory to report, but there is a question you can click on--"What counts as inventory"--that pops open a window that says, "If you have less than $1,000,000 in sales or receipts for each of the last three years, you are not required to report inventory." I am a sole proprietor who has sales for just one year (so I think that one year is used instead of three) who had sales of way less than $1,000,000 this year. The Inventory/Cost of Goods Sold category says, "If you're not reporting inventory, but had material & supply expenses, enter them as supplies under expenses.
The only possible interpretation of this is that I can avoid doing an inventory, and just list my material & supply expenses as supplies under expenses. Which flies in the face of other responses to similar questions I've seen here and articles I've read by CPAs online. Is Turbotax correct?
You have the option to report the COGS in the inventory section OR the expenses section usually under the supplies option but you MUST report all income & expenses on the Sch C ... you may not leave any out to manipulate the bottom line of the form 1040 or any other credits.
So does this mean that if your business makes less than $1M in gross receipts, then you’re not required to report any inventory carryover? And so you can simply report whatever goods were purchased to make or sell your product as a material expense? Thanks