Carl
Level 15

Deductions & credits

Using the 2020 tax year and 2020 tax return as an example, always keep this in mind.

Your beginning of year inventory must match exactly the prior year's end of year inventory. If it does not, then you have some 'splain' to do with the IRS. There is absolutely no reason the IRS will accept for why it does not match.

 

What this means if that your 2020 end of year inventory is zero, then you're 2021 beginning of year inventory absolutely positively must be zero. If it's not, then that's a flag to indicate you probably reported the incorrect end of year inventory on your 2020 return. That has a very high probability of resulting in an "audit by mail" from the IRS for your 2020 return, your 2021 return, or both.