topic Keeping track of inventory in Self employed

Keeping track of inventory

Je378 — Wed, 27 Oct 2021 21:01:32 GMT

Keeping track of inventory has me lost. I sell handmade products made from yarn. I understand that I can write off the cost of my materials. But how do I track the cost of yarn when the number of yarn balls used don’t exactly mirror product. Meaning that sometime our use multiple balls of yarn on one product but other times one ball might get me three products that sell at different prices. Can I write off how much I buy in yarn in total against how much profit I make off of the products?

Re: Keeping track of inventory

Anonymous_ — Wed, 27 Oct 2021 21:10:21 GMT

You are more likely than not considered to be a small business taxpayer and, as such, are not required to keep an inventory.

See https://www.irs.gov/publications/p334#en_US_2020_publink1000313268

Consequently, you can deduct the cost of the materials (yarn) you purchase as "supplies".