how do i account for old inventory (bought in 2017/18)

[b1rch3ll]

Hello everyone! I recently ramped up my ebay business and now need to complete a 1099k. This is my first time doing this. A majority of my inventory was bought in prior years (2017-2018). I was basically stock piling it so i could have enough to start a new, decent sized store. Sorry if this is a stupid question, but do i have to do anything special because this inventory was bought in a year other than 2019? Do i just add up all my receipts from those prior years and add it in with my 2019 costs?

Also, a majority of my receipts just say (electronic item - $12) for example, since a majority of it is from thrift stores. Will this be a problem for me? I know i should have been labeling them and taking more precaution. But i didn't label them all... Any help is appreciated.  Thanks!!

[Carl]

Inventory is dealt with in the Cost of Goods Sold (COGS) section. I am assuming that 2019 is the first year you are dealing with inventory. So its important that you understand that your BOY (Beginning of Year) inventory balance *MUST* be zero. There are no exceptions. It flat out does not matter in what tax year you purchased the inventory. What you paid for that inventory is not a deductible business expense until the tax year you actually sell that inventory. Again, it flat out *does* *not* *matter* in what tax year you purchased it either. Here's a few examples of how COGS works.

BOY (Beginning of Year) Inventory - What *YOU* paid for the inventory in your physical possession on Jan 1 of the tax year. If this is your first year of business or your first year to carry inventory, then your BOY Inventory balance *MUST* be zero. There are no exceptions.

EOY (End of Year) Inventory - What *YOU* paid for the inventory in your physical possession on Dec 31 of the tax year. Again, it does not matter in what tax year you paid for it either.

Cost of Goods Sold (COGS) - What *YOU* paid for the inventory you *actually* *sold* during the tax year.  Again, it does not matter in what tax year you paid for that inventory either.

Here's a few examples of COGS.

Year 1:

BOY Inventory - $0

COGS - $5000

EOY Inventory - $1000

The above indicates that I started the year with no inventory. Throughout the year I purchased a total of $6000 worth of inventory, and sold $5000 worth of inventory leaving me with $1000 of inventory on Dec 31 of the tax year.  Understand that your BOY inventory ***MUST*** match *exactly* the prior year's EOY inventory. Since this is my first year dealing with inventory, my prior year's EOY balance was zero since I did not have any inventory *IN MY BUSINESS* in the prior year, or my business did not yet exist in the prior year.

Year 2:

BOY Inventory $1000 - If this balance doesn't match my prior year's EOY inventory, then I've got some 'splainin' to do to the IRS and they flat out will "NOT" accept any reason I give them. There is absolutely no reason for the year 2 BOY balance to not match the Year 1 EOY balance.

COGS - $5000

EOY Inventory - $9000

THe above shows I started year 2 with $1000 of inventory. It also indicates I purchased another $13,000 of inventory throughout the year giving me a total of $14,000 in inventory over the entire year. Of that $14,000 I sold $5000 of that inventory leaving me with $9000 of inventory in my physical possession on the last day of tax year 2.

This is how the IRS requires you to do this, because you can not deduct what you paid for inventory, until the tax year you actually sell that inventory. Period. It flat out does not matter in what tax year you purchased and paid for that inventory either.