IRS Rejected return due to negative inventory?

[Tlynncpa]

I have completed my 2020 return but am getting the error that the IRS has rejected due to negative Inventory on my Schedule C.  I have inventory and it was the same as last year and both are positive numbers.  I have changed the ending balance slightly to see if it was a turbo tax thing.  I printed the return and went over every number and there is not place that I see negative inventory.   

Any help would be appreciated

[Carl]

Many folks get confused when it comes to COGS and inventory. Even those of us experienced with this can get what I called "Febuzled" at times. So double-check yourself, and triple check if necessary. I have very little doubt it's a program issue, and at this time lean towards it being a data entry issue. It's most common when you have declared inventory removed for personal use.

BOY (Beginning of Year) Inventory Balance - What you paid for inventory in your physical possession on Jan 1st of the tax year. This must match the prior year's EOY inventory. No exceptions. Therefore the first year inventory balance must be zero regardless of when that inventory was purchased. That's the only possible way to match the prior year's EOY balance.

EOY (End of Year) Inventory Balance - What you paid for inventory in your physical possession on Dec 31 of the tax year.

[Tlynncpa]

I am "Febuzled" for sure.  BOY Inventory = EOY Inventory so COGS is Purchases for the year.  It tells me EOY Inventory is negative so I don't know why.  I looked back at last year and I used Lower of Cost or Market (LCM) for inventory method and this year I selected Cost.  I corrected that and resubmitted.  Still same issue.  No personal use of inventory or other adjustments.  Exact error is below:

Data in the return is missing or invalid.  Please double check your entries.

We encountered an issue processing your e-filed return.  Review the reason for the reject related Schedule C, Profit or Loss From Business, Inventory at End of the Year.  The IRS does not allow this to be a negative amount.  Make the appropriate change(s) and re-submit this return electronically.  if the reject continues, you need to print and file this return via U.S. Mail.

[JotikaT2]

Make sure you did not enter anything else in the inventory section.  Did you possibly add other purchases in the cost of goods sold section instead of entering them as other costs?

This could result in the negative ending inventory balance.  The input would be in the inventory section of the program under the screen titled Let's get the costs of your goods.

Please see the link below to see if that helps narrow down where the issue could be.

Reporting inventory

[DuffTax16]

I am also getting this message.  i have tried everything to get rid of it.  i do not have any inventory.  the data sheet in TurboTax shows zero for beginning and ending.  No luck to get it through.  Anybody solve this glitch?

[cg_texas]

I have the same issue. Currently on the phone with a turbotax tax accountant to review. Will let you know if I find a solution. I have two schedule Cs one with $0 inventory values (beginning and end) and one with $XXX ending inventory value all values in part III of Schedule C are positive. not negative.

My gut says the issue is the software rejects it because my schedule C inventory is = $0. When their code may reject when things are not > $0. And the code should say >=$0. This is just my gut feeling though.

Also I should note, my filing has been the same the last 5 years, and this is the first time I've received a rejection from turbotax. AND my filing passes the review process prior to filing with no warnings/flags.

[matthiasr99]

I am also having this issue.  Has anyone found a solution?

[cg_texas]

Hi all,

So here's an update. After multiple tries/submissions/rejections with the tax accountant and the turbotax IT folk (two of them), I've successfully been able to submit my taxes without a rejection (hasn't been accepted yet  - but every rejection is an exact 5 minute lag via email and I'm well past 30 minutes without the rejection email).

Root cause:

The rejection statement saying due to "Schedule C, Profit or Loss From Business, Inventory at End of the Year." is wrong/misleading. It was not due to inventory. It is due to an expense being negative.

• I received a refund from insurance which resulted in my general liability being -$500 on the expense line.
• Accountant and IT suggested remove that there. So I put $0. And then put in Other Income +$500. Returned Income (Insurance).

[Tlynncpa]

This is good news bit a little late for me as I printed and maul my return already. 

Perhaps Intuit could be more specific with negative values in general vs pointing us to inventory and cogs.  

much appreciated and will keep it in mind. 

[DuffTax16]

Thank you!  Great news!

[schulz995]

Oh, this is helpful information!!!

Yes, I had a negative entry for a cost on travel too.  Because of COVID, there was a trip in which I was refunded money, so my entry for travel has a negative number in it.

Thanks for pointing this out!  I'm going to try and remove that and move the negative number as a positive number to my income by the same amount.

[Grognot]

I have been using TurboTax Home and  business for over 25 years. I have a consulting business and therefore do not have beginning or ending inventory. My Federal return was rejected for incorrect end of year inventory. It should be zero or blank. 

In Business Income and Expenses on the "Do you have inventory to report?" page. There are two questions with radio buttons,

O  Yes, I have inventory to report.

O  No, I don't have inventory to report. 

The first choice was pre-selected when I first went to this page.  I clicked the second choice and then hit "Continue."  Normally when I am reviewing my return and return to a page that I have completed, my selections are already shown as I had left them. In this case, when I returned to this page, the " Yes, I have inventory to report." button was always pre-selected.  This is very unusual. 

This was the first time in my more than 25 years of using Turbo Tax that my Federal return was rejected. I tried selecting the "No inventory to report: option the first time that my return was rejected. This did not fix the problem. Then I created an inventory of $1 at the end of the year. This did not fix the problem.  Each time the return was rejected, I reviewed it and re-submitted. I switched from "Step By Step" to "Forms" and reviewed each form. I found several check boxes and checked those, hoping that this was the problem. It did not. I made 7 submittals yesterday and each time, my Federal return was rejected. 

I have now given up and printed my 70+ page return and submitted it via mail at the USPS. I do not remember the last time that I filed a US tax return via paper. I used electronic transmission right from the start.  I dropped off the returns at the post office this afternoon. It was 2:00 PM and there were no line. 

I spent over 4 hours yesterday trying to submit, getting rejected, reviewing  and re-submitting my return.  As I said, my return was rejected 7 times yesterday. 

Before, the TurboTax review step always picked up multiple items which needed correction. This is most likely why I never had a return rejected before. This time, the review process picked up nothing to correct. Perhaps this is the cause of the problems I had with submittals. At the very least, the review process is missing some error that the IRS picked up. I have not idea what the actual cause of the rejections were. 

[Grognot]

This may be my problem also. I also had an insurance refund in 2020 which shows up a a negative expense.

If this is the problem which is causing the IRS to reject returns, then Turbo Tax should pick this up during review. 

[NatAddleman]

I am getting the same rejection error.  I have a consulting business and do not have any inventory.  My 2019 return shows no inventory at the beginning and end of 2019.  My 2020 return shows no inventory at the beginning and end of 2020.  However, my 2019 return does have an entry for "Cost of Labor" brought over from QuickBooks.  This labor cost did not produce an entry in the 2019 beginning or end of year inventory.  Is it possible there is a "glitch" that is causing some to think there is an inventory discrepancy?   If so, is there a fix?  Or, do I just mail a paper return?  Thanks for any help.

[NatAddleman]

Thank you for posting your problem and solution.  I too was receiving the same error message.  As a consultant who never has inventory, I couldn't figure out what was causing the error...until I read your post.  I searched for and found a very small negative expense (-$3).  I don't know how it got there when it was imported from QuickBooks, I am now at the 25 minute mark from submitting the return, after receiving past rejections within 5 minutes.  So, I am hopeful following your information solved the problem.  Thanks again for your post.