I shipped a product via FedEx which was lost in transit and never recovered. A FedEx claim resulted in a small refund worth about 10% of the product. Can I claim the remaining lost income as a business deduction? If yes, where do I enter that. Thank you.
Yes, you can claim the loss. Because the product was part of your business (we assume that your loss was in connection with your on-going business), this would be part of your inventory, and would increase your cost of goods sold, and decreases your gross income from your business.
This goes in the Business section, under Inventory/Cost of Goods Sold. When you keep an inventory, you report your beginning inventory for the year and your ending inventory for the year, and you enter your purchases for the year. So anything like damages that reduces your Ending Inventory is going to increase your Cost of Goods Sold, and lower your profit.
To enter into TurboTax online, go to the Income & Expenses section. Use the Search function (upper right of page) and enter Schedule C. Click on the jump-to link for Schedule C and after entering your income, TurboTax will ask about expenses. Scroll down the page and select Inventory. If you don't see Inventory, click on the drop down arrow to open additional categories of expenses. After opening the Inventory section, enter your information concerning the lost/damaged product.
In TurboTax desktop, select Business, then Business Income and Expenses. Lastly, select Inventory/Cost of Goods Sold.
I appreciate your answer and detailed insight, but I see that I should have noted that the product is commissioned artwork, so there is no inventory. The products, aka artwork, are created and shipped when completed. Can I claim this loss in a way that does not involve inventory reporting? Thank you.
As commissioned artwork, it fair to characterize it as a work in process. A work in process is a form of inventory. Accordingly, you can still enter the lost artwork as cost of goods sold.
Thank you for your added insight and reply. I'll try to make this methodology work. Thank you.
UPS lost a large shipment and is giving me the run around on the claim. Can I deduct this loss if I don't use the inventory method? I replaced the shipment to the customer. Can I deduct the loss of income or only the cost of the merchandise?
If I understand you correctly, you sold product as part of normal sales and shipped it. Product lost and you sent new product.
No, the income stays the same as reporting one sale. The replaced product is deducted as a normal expense of sale...you don't claim income for the replacement product.
Thus, claim the normal sale as income, and expense 2 product as COS