I'm on TurboTax Self-Employed. I'm a reseller on eBay. Where do I enter the cost of merchandise that I resell? I don't see the option in the list of 12 expenses.

[Mike9241]

I'm assuming your annual sales are less than $25 million and that you do not use the accrual method of accounting. in that case use the lines for supplies or  create your own line item - materials and supplies. you deduct the amounts paid to acquire the items sold as a cost in the year in which they are sold

[ppapi]

Thanks.

You say "use the lines for supplies or create your own line item". How do I do it exactly in TurboTax Self-Employed? Could you guide me?

I'm just very surprised that the option to enter the cost of purchased goods is not easily available, considering the number of eBay resellers that will be doing taxes this year.

Could you please help me? Thanks again.

[ppapi]

Unfortunately I'm unable to see the inventory choice.

- I first add the new self employed income (add another line of work)
- Then I'm prompted the following:

Advertising

Handmade goods sales

Videography

Package delivery

Nursing

None of these apply.

and I select "non of there apply" because I just resell new items that I buy online (not used, no antiques, no jewelry ... just brand new items like small electronics, for instance).

- Then I select this is a Business and I follow the few prompts
- Then I see the summary info and select "Looks Good"
- Then I enter the info from my 1099-K from eBay (I also tried skipping this for later, same results)
- Next I see this message: "We found 11 expense categories that others in eBay often claim!", but there is no inventory (I see Vehicle, Home Office, Communications, Assets, Supplies, Advertising, Meals (50%), Legal and Professional Fees, Business Travel, Office Expenses, Meals (100%))

What should I do to see the inventory, so I can enter the cost of the purchases items?

I'm very confused because the majority of eBay resellers are just selling new items purchased somewhere else. It is extremely important to enter the items expenses because my actual profit could be just a 10-15% of the gross income mainly due to the cost of the items before selling them.

Why is this so difficult to find? Is there a basic mistake that I'm doing while entering the income?

Thanks a lot.

[ppapi]

Hi again, something more about this.

In this article from TurboTax:
https://turbotax.intuit.com/tax-tips/self-employment-taxes/a-tax-filing-factsheet-for-ebay-sellers/L...

it is said:

Business tax deductions for eBay sellers

The only tax deductions you can use to reduce your gross eBay sales income are those authorized by the IRS, but you'll have quite a few to choose from. Consider whether you qualify for:

• Costs to purchase or fix up the items sold
  
  

I'm using TurboTax Self-Employed (online) and I'm unable to find the place to enter the "Costs to purchase or fix up the items sold".

Thanks again.

[DavidD66]

The cost to purchase and make improvements to the items you resell is your Cost of Goods Sold (COGS).  As you go through the TurboTax interview, you will be asked about our expenses.  One of the expenses you can select is "Inventory".  Select Inventory as an expense category and continue with the interview.  When you get to the screen that says "Let's get the cost of goods for your [business] sales work".  Here you will enter the cost of the items you purchased for re-sale, the costs to "fix up the items sold".  This will give you your COGS, which will be listed as an expense on your Schedule C, which reports the income and expenses for your business. 

[ebayseller]

I'm also a small business eBay seller.  I resell computer discounted parts which I buy in batches.   I sell them on eBay until they are gone and buy another batch.  It's a very small business.  With that said, Turbo Tax prompts me to use the "cost method to value inventory" or the "lower of cost or market" method.   Which would you suggest for a small eBay reseller?

Thanks

Charles

[MonikaK1]

I cannot give advice, but there is a wealth of information online on this subject.

IRS Publication 538 (see pp. 13-15) explains the two methods. 

If you are a small business taxpayer (defined in the pub), you can choose not to keep an inventory, but you must still use a method of accounting for inventory that clearly reflects income. A small business taxpayer can account for inventory by

• (a) treating the inventory as non-incidental materials and supplies, or 
• (b) conforming to its treatment of inventory in an applicable financial statement (as defined in section 451(b)(3)). 

If it does not have an applicable financial statement, it can use the method of accounting used in its books and records prepared according to its accounting procedures.

The value of your inventory is a major factor in figuring your taxable income. The method you use to value the inventory is very important. The following methods, described below, are those generally available for valuing inventory. 

• Cost. 

• Lower of cost or market. 

• Retail.

Cost Method 

To properly value your inventory at cost, you must include all direct and indirect costs associated with it. The following rules apply. 

• For merchandise on hand at the beginning of the tax year, cost means the ending inventory price of the goods. 

• For merchandise purchased during the year, cost means the invoice price minus appropriate discounts plus transportation or other charges incurred in acquiring the goods

Lower of Cost or Market Method

Under the lower of cost or market method, compare the market value of each item on hand on the inventory date with its cost and use the lower of the two as its inventory value. This method applies to the following. 

• Goods purchased and on hand.

• The basic elements of cost (direct materials, direct labor, and certain indirect costs) of goods being manufactured and finished goods on hand. 

This method does not apply to the following. They must be inventoried at cost.

 • Goods on hand or being manufactured for delivery at a fixed price on a firm sales contract (that is, not legally subject to cancellation by either you or the buyer).

 • Goods accounted for under the LIFO method.