DawnC
Employee Tax Expert

Business & farm

If you don't keep an actual inventory account and want to use the COGS account (you don't have to use it) - just use 0 for both the beginning and year-end inventory balances.  

 

Large businesses that purchase, produce, and/or sell merchandise to generate income usually keep inventory and use the accrual method of accounting.  The inventory's value at year-end is subtracted from its value at the start of the year (plus purchases made during the year) to arrive at the cost of goods sold (COGS) for that year.

 

However, if your business's annual gross receipts for the last 3 tax years averages out to $26 million or less per year, you can opt to use the cash method and expense the cost of inventory at the time it was purchased, rather than waiting until after it's been sold.

 

In TurboTax, you can report these costs in the inventory section as COGS or in the expenses section as supplies.  Either way, you don't have to report inventory but you do need to carefully track what you paid for the products, materials, and supplies that go into your inventory.

 

Reporting inventory costs in TurboTax Online

Reporting inventory costs in TurboTax Home & Business

   

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