To claim the purchases you made during the year, please pick the appropriate category for the expenses below, depending on whether you maintain inventory (items on-hand for resale).
Inventory
If you have a business that purchases items for resale and has a constant stock of items, you are able to deduct the cost of the items only when they are sold. Any stock on-hand is considered inventory, and is not deductible when purchased. The inventory purchased will be included in the Cost of Purchases when inputting your Cost of Goods Sold (COGS):
- When you get to the screen that asks "What kind of expenses did you have for <your business>?", choose the drop-down for "Less common expenses" and select "Inventory"
- Click "Continue"
- Select "Yes, I have inventory to report"
- Select "Yes" to using the Cost Method to value inventory (recommended), or "No" if you use a different methed
- Enter the value (at cost) of your inventory at the end of the year; click "Continue"
- Enter the Cost of Purchases and any other expenses or inventory withdrawn for personal use
The above steps will include the cost of the items in Cost of Good Sold on your return.
If you do not maintain inventory:
- When you get to the screen that asks "What kind of expenses did you have for <your business>?", choose the drop-down for "Less common expenses" and select "Other miscellaneous expenses"
- Click "Continue"
- Scroll down to Expenses; find "Other miscellaneous expenses"; click on the blue Start button
- Enter a description such as "Merchandise purchased" and enter the cost of the merchandise that you purchased during the year, including any amounts paid when you purchased the business.
