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Level 3

Solved

Where do I write off Obsolete Inventory which I have either trashed or donated ? Thank you.

Forum|Forum|7 years ago
June 5, 2019
6 replies
40 views

Does it get deducted from the Purchased Inventory for the year or or somewhere else?

TurboTax Home & Biz Windows

Best answer by IsabellaG

Inventory that you have either trashed or donated will be reflected in a lower Ending Inventory, which will increase your Cost of Goods Sold. The calculation is:

Beginning Inventory + Purchases - Ending Inventory (which will be lower because the obsolete inventory is gone) = Cost of Goods Sold.

This calculation is accomplished on two screens:

Report the value of your inventory
Let's get the cost of your goods.

IsabellaGAnswer

Level 13

Inventory that you have either trashed or donated will be reflected in a lower Ending Inventory, which will increase your Cost of Goods Sold. The calculation is:

Beginning Inventory + Purchases - Ending Inventory (which will be lower because the obsolete inventory is gone) = Cost of Goods Sold.

This calculation is accomplished on two screens:

Report the value of your inventory
Let's get the cost of your goods.

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

eagleness54Author

Level 3

So I basically just deduct the amount from the ending inventory figure? I'm confused.

michellehomebiz

Level 8

I'm guessing you this is for business you own.

eagleness54Author

Level 3

Yes and business did not close.

Downbound Steve

Level 2

I was under the impression that the rules for a sole proprietor to write off inventory was not as simple as just reporting a lower inventory for cost of goods sold. I was under the impression that a sole proprietor would not be able to take that loss on the schedule C. Does anyone have any advice?

RobertG

Level 12

If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it or its basis. The basis of contributed inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. You must remove the amount of your charitable contribution deduction from your opening inventory. It isn't part of the cost of goods sold.

If the cost of donated inventory isn't included in your opening inventory, the inventory's basis is zero and you can't claim a charitable contribution deduction. Treat the inventory's cost as you would ordinarily treat it under your method of accounting. For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year.

IRS Publication 526

@Downbound Steve

**Say "Thanks" by clicking the thumb icon in a post. **Mark the post that answers your question by clicking on "Mark as Best Answer"

Downbound Steve

Level 2

Robert,

OK, say my inventory was 10,000 at the beginning of 2020. I enter 0 for end of 2020. Then the next screen asks how much of this amount was removed for personal use. I assume I enter the full 10,000. Is there anything else I need to do on Turbo Tax before I enter the 10,000 donation I made to the registered charity in late 2020?

Carl

Level 11

COGS (Cost of Goods Sold) is what "you" paid for the inventory. Just include what "you" paid for the inventory that was trashed, in your cost of goods sold.

ABALLIETT

Level 4

So, I'm confused, of course...

when I increase my COGS by the worthless inventory, do I have to itemize that with my return or just keep it in my records?

Carl

Level 11

Let me clarify.

I have $2000 of inventory consisting of 2000 widgets I paid a $1 each for, and I sell them for $2 each.

Of that inventory I sold 10 widgets and had to throw another 10 away because they were bad, defective or whatever.

I'm going to report that I sold $20 worth of inventory. That will allow me to deduct $10 for the ones I actually sold, and another $10 for the ones I had to throw away. My EOY inventory balance will be $1980.00

ABALLIETT

Level 4

Hi - Thanks for your patience and this detailed answer. I think I understand what you are saying in your example, but at the same time I'm confused because of what I wasn't clear on when I asked the question.

When you're filing your Schedule C, how do you 'report' or 'keep track of' the Worthless Items taken out of inventory? Is this only in the store books or does it have to be itemized on the schedule C (somewhere) Outside of an audit, is 'beginning inventory' and 'ending inventory' all you have to report in regards to 'cost of goods sold'?

I appreciate your help

ABALLIETT

Level 4

Thanks for you patience, Hal_Al

What I'm asking this time is how do I handle non sale 'payments' that are on my 1099k but that I did not 'profit' from

For example, I do lots of environmental non-profit work I do a podcast and have substantial publishing changes (libsync) that a non profit is obliged to pay for since I work for free but they expect me to be the go between for my acct with the service provider. So they send me a few $300 checks a year and I pass that money to libsync in a separate payment transaction

Those $300 payments show up as 'income' on the 1099k, although they aren't even my money.

How do I remove them from the official 1099k total? (I think you showed how to do that and I was just asking if you still believe that method is accurate and dependable)

Thanks

Hal_Al

Level 15

From the other thread ( https://ttlc.intuit.com/community/taxes/discussion/re-1099-k-from-paypal-and-i-don-t-have-a-business/01/2231178/highlight/false#M801650)

Q. Is there a way to do enter a 1099-K without claiming it as income?

A. Yes. You have to use a workaround in TurboTax.

Notice that there is no specified place, in TurboTax (TT) for a 1009K. That's because you are supposed to know what the income is for.

In TurboTax (TT), enter at:
- Federal Taxes tab (Personal in Home & Business)

- Wages & Income

Scroll down to:

-Less Common Income

-Misc Income, 1099-A, 1099-C

- On the next screen, choose – Other reportable income

- On the next screen, click yes

- On the next screen, you'll get blanks to enter the amount and a description. It will go on line 8 of Schedule 1 as "Other Income". Suggestion for description: Amount reported on 1099-K

When that's done, do it again (a 2nd entry). This time make it a negative entry; put a minus sign (-) in front of the amount. Suggestion for description: 1099-K offset: Taxable portion reported elsewhere on forms