Am I counting everything at the end of the year that I have sitting around? No. Not if you are not keeping an inventory as a small business, you do not need to count anything at the end of the year, unless you just feel like it for your own information.
If I buy something to sell this year and I sell it NEXT year, don't I just incorporate those figures into NEXT year's taxes? $5.00 item that sells for $10.00 and I pay taxes on the $5.00 profit NEXT year? Yes and no. This year you would take a deduction for the $5 and then next year you would pay taxes on the $10. because YOU ALREADY TOOK A DEDUCTION for the $5 you spent on your tax return the year before.
Basically, all you need to do is in the year you buy something, you include it on your taxes as a supply expense. So if in 2024 you bought trinkets and spent $100, then you would include that $100 as supplies on your 2024 tax return. Then if you sell them for $200 in 2025, you will NOT include anything as for supply expenses, but you will include the $200 that you received for selling the trinkets.
For your own accounting and tracking purposes you can look at what you spent and what you made as a profit on the items you sold, however, for tax purposes, the 2 do not need to be linked.
All you are doing is in the year you buy something include it on your return that year for tax purposes then totally forget that you spent that money the next year and then in the year you sell something include that income on your return and don't think about what you spent the year before. Your supply costs and your income do not need to be reported in the same year. They are reported when you spend the money or when you earn the money. If it is in the same year, then you will report both in the same year, but they are not linked to each other when it comes to tax reporting when you are not using an inventory method.
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