So confused:
1. I'm filing taxes for my art income for the first time. In trying to figure out my starting inventory - is it ok to say $0.
2. To compute the cost of this year's inventory, some of my supplies for this tax year were purchased in prior years (e.g. paper, framing supplies, paint etc). Do I just take a loss on those? Only compute cost based on what was purchased this year to create those works?
3. Also I mistakenly submitted my return without really understanding the prompts. So now I'm trying to amend my return to correct costs/inventory/expenses. Am I in trouble or ok if I amend before Apr 15th?
Any tips for a first-timer would be appreciated.
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If you are reporting your artistic income through a self-employment activity on an IRS Schedule C Profit or Loss From Business, the cost of inventory and cost of goods sold are recorded within the self-employment activity.
Starting inventory may be $0. However, depending upon the nature of your art, the cost of the paper, framing supplies, paint, etc. may be considered part of your beginning inventory.
In TurboTax Online Premium, to report expenses under Self-employment income and expenses, follow these directions.
You may amend before April 15. However, you should wait to amend until your tax return has been transmitted, accepted by the IRS and a refund issued or balance due recorded.
If you used TurboTax Online, log in to your account and select Amend a return that was filed and accepted.
If you used the CD/download product, sign back into your return and select Amend a filed return.
See also this TurboTax Help.
So, to clarify, are you saying that, if I bought supplies in 2023 specifically used to create the artwork sold in 2023, that amount should go in the Inventory section? Or do all the supplies bought in 2023 used to create all 2023 work (sold and unsold), go in the Inventory section (so my inventory isn't really about the prior year in my case because it's a new business)?
Do all other new supplies (like paint, brushes) go in materials/supplies?
The inventory is the supplies that you've bought that are still lying around. So, for example, you start your business in 2023 and have 8 jars of paint already. Then you buy 20 jars of paint during the year (those 20 are your supplies expense). You've painted all year so at the end of the year you had 5 jars of paint. It looks like this
Beginning inventory - 8
Purchases - 20
Ending Inventory - 5
Cost of goods sold - 23
Now, in reality, you need to enter the cost of all those supplies in instead of numbers like that, but otherwise it's all of those. And since you purchased the supplies that you had when you started the art business before this year it is a good idea to add them to your starting inventory.
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