How to calculate Farming Costs of Goods Sold Form1125-A

[attse]

I have a Multi-member LLC Vegetable Farm and have completed Schedule F for the farming income and expenses. How does form 1125-A come into the picture?  Is it needed? We dont keep inventory, what was picked was either sold or donated to a local food bank. I have the all of the details for the expenses related to COGS except labor. The only individuals that provided labor on the farm were the LLC members.

[ColeenD3]

I can't imagine how you would keep inventory for produce that you grow.

Form 1125-A states:

Inventories Generally, inventories are required at the beginning and end of each tax year if the production, purchase, or sale of merchandise is an income-producing factor. See Regulations section 1.471-1. If inventories are required, you generally must use an accrual method of accounting for sales and purchases of inventory items.

Exception for certain taxpayers. If you are a qualifying taxpayer or a qualifying small business taxpayer (defined below), you can adopt or change your accounting method to account for inventoriable items in the same manner as materials and supplies that are not incidental.

Under this accounting method, inventory costs for raw materials purchased for use in producing finished goods and merchandise purchased for resale are deductible in the year the finished goods or merchandise are sold (but not before the year you paid for the raw materials or merchandise, if you are also using the cash method).

If you account for inventoriable items in the same manner as materials and supplies that are not incidental, you can currently deduct expenditures for direct labor and all indirect costs that would otherwise be included in inventory costs. See the instructions for lines 2 and 7.