I have been tracking inventory in 2021 but want to stop tracking inventory. I operate on a Cash Basis of accounting as a Sole Prop. I want to verify the procedure I will use on my 2022 tax return. I had an ending inventory of $521 for 2021 tax return. When I prepare my 2022 tax return, how do I remove or edit the beginning inventory (of $521) to reflect a 0 beginning inventory? AND, I want my return to reflect that I wont carry an inventory for 2022. I would deduct any resale supply purchases in the year 2022, instead of calculating COGs, etc. How do I remove the COGS calculation page in TT.
Also, I have moved to a new home and have a new home office in which I will deduct home office expenses. Will I be editing my home office or will TT prompt me to add a new home office and remove the old home office?
Thanks for any guidance.
Yes, the steps you outline above should take care of the COGS situation going into 2023. When you are entering the 2023 data, there should be a prompt in the Inventory section that you do not carry inventory and it should remove any entry or message pertaining to the COGS section.
In the future, for any materials you purchase just list them as Materials and Supplies in the expense section of your Schedule C entries.
For tax year 2022, you need to start with the ending inventory that you listed for 2021. If you ignore the inventory for 2022 you are inviting a notice from the IRS requesting further information. List ending inventory for 2022 as zero so as to include your beginning inventory in your costs and not having to carryover any amounts when you begin your 2023 tax return.
As for the home office, you can add the new home office and remove the old home office in the steps to follow for your Schedule C.
Thanks so much! Yes, I understand what you are saying. I just need to know how to get to the ending inventory of 0 for my 2022 return.
For my 2022 return, Do I enter my begininning inventory of $521 add purchases of $509.40, then enter 0 for inventory which will result in $1030.40 in Cost of Goods Sold ? Therefore, I will not carry an inventory starting in 2023.
Also, In 2023, Do I need to manually remove the TT COGS calculations worksheet altogether or will stating that I do not have an inventory take care of this?
Yes, the steps you outline above should take care of the COGS situation going into 2023. When you are entering the 2023 data, there should be a prompt in the Inventory section that you do not carry inventory and it should remove any entry or message pertaining to the COGS section.
In the future, for any materials you purchase just list them as Materials and Supplies in the expense section of your Schedule C entries.