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Tom S
Returning Member

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

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?

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6 Replies

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

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. 

JF300
New Member

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

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 

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

This was posted by Turbo Tax just about a month ago:

 

Large businesses that purchase, produce, and sell merchandise to generate income usually keep inventory and use the accrual method of accounting. The inventory's value at year-end is subtracted from its value at the start of the year (plus purchases made during the year) to arrive at the cost of goods sold (COGS) for that year.

However, if your business' annual gross receipts for the last three tax years average out to $26 million or less per year, you can opt to use the cash method and expense the cost of inventory at the time it was purchased, rather than waiting until after it's been sold.

In TurboTax, you can report these costs in the inventory section as COGS or in the expenses section as supplies. Either way, you don't have to report inventory but you do need to carefully track what you paid for the products, materials, and supplies that go into your inventory.

https://ttlc.intuit.com/community/tax-topics/help/do-i-need-to-report-inventory/00/1700549

 

Based on that, I would say reporting BOY and EOY inventory is not required for companies with 3-year averages of less than $26 million.  Only COGS for sold inventory is required to be reported.

 

If I report BOY and EOY inventory this year, AND didn't sell any of that inventory, then my taxable income increases.  Which is infuriating that IRS is taxes us on purchased inventory.

 

I am looking for answers on this too, please correct me if I am  wrong.

JK85
Returning Member

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

On this subj, if i reported inventory for tax year 2020, can i stop reporting inventory for 2021 and report the COGS (what i paid for my inventory in 2021) under misc expenses section?

 

Do I have to report inventory? Home and Business, under Cost of Goods Sold, has a window saying I don't have to because I have less than $1,000,000 in sales.

No because it would not be a miscellaneous expense and the IRS may wonder what happened to inventory. Enter the beginning inventory and put zero for the ending if you don't have any. In that next page, they ask about purchases. You would enter it there. That is the formula for the Gross Profit.

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