Your inventory consists of the purchases you make to sell, the goods you have on hand, and the goods at the end of the year.
For example, you paid $100 for ten books. This is Cost of Goods Sold. Your beginning inventory is $100. You sold five books, regardless of the price. Your inventory is now at $50. You buy ten more books for $150. Your inventory is now $200. At the end of the year, you still have fifteen books. This is your closing inventory.
Cost of Goods Sold gets carried to page one of Schedule C to be counted against your income.
Please see the instructions below for adding your inventory:
- On the Tax Timeline, select "Business".
- Click continue then select "I'll choose what I work on".
- Click update/start next to "Business Income and Expenses".
- Select "Edit" next to your business name (or add your business information here if you haven't already).
- Scroll down to "Inventory / Cost of Goods Sold" and click "Start" to begin entering your inventory.
If you do not see the Business tab on the Tax Timeline, on the right side of the screen click the "Search" magnifying glass and enter "Schedule C" and hit enter on your keyboard. You should then see "Jump to Schedule C", click on this and you will arrive at the business information screen and you can click edit or add a business to begin, then follow the remaining instructions from above.
