Hi there and thank you for helping.
When I prepare my taxes and I put in beginning inventory and ending inventory my owed taxes jump significantly in turbotax. My 2020 beginning inventory is $5663 and ending inventory is $5252 (beginning inventory minus $411 which is the amount I paid for the goods in 2019)
I'm very confused about this and I'm not sure that I can explain it in a clear way, but I hope you'll understand. I'll use rough numbers but close to the real ones.
In 2019 I started an online t-shirt retail business. I paid a manufacturer $5,700 to manufacture and send me 300 t-shirts. The T-shirts cost me $19 per piece. In 2019 aI sold 8 t-shirts. When I filed my taxes I reported income of $200 (8 t-shirts sold for $25 each) and in inventory I put 0 as beginning inventory and $5548 as ending inventory (5700 - 8*19 which is the cost that I paid for the shirts I sold) My thinking was that I need to report the total value of all t-shirts in storage. Did I mess up here?
In 2020 I sold 25 t-shirts for a total of $625 which I will report as 1099-K income. My question is why do my owed taxes jump when I report the end of year value of my inventory? Maybe I don't get the inventory part very well. Also what is the best way to proceed with this? I'll answer any questions you might have for me. Once again thank you for helping.
