HELP!! I am still confused with this tread. I am trying to enter the information in TurboTax and is removing everything.
We are a small business partnership. My small business just began this year, so our BOY inventory is $0, then we purchased inventory and paid it to begin business, purchases $2500, we sold some items but not a lot, so our EOY inventory is $2000. In turbo tax under the deduction section in COGS the amount comes up to $500 BOY+Purchase-EOY=COGS. Per the comments above and because I am a small business making less than a million, I understand that now I need to also report purchases under Expenses as "Supplies" so that will be only the $2000 (Purchases-COGS?)? To avoid the "double deduction". Am I understanding this correctly? Or should I just enter $0 (zero) under my BOY and EOY and leave the "supplies" expense alone??
When I go to Supplies, this is getting me even more confuse: the TurboTax explanation:
Supplies:
Unless you deducted the cost in any earlier year, you can generally deduct the cost of materials and supplies actually used during the tax year.
If you keep incidental materials and supplies on hand, deduct the cost of the purchases during the tax year only if all three of the following requirements are met:
1. No record is kept of when used,
2. You do not take an inventory of the amount on hand at the beginning and end of the tax year, and
3. This method does not distort your income.
Include the cost of books, professional instruments, equipment, etc., normally used up in less than a year.
