I threw out inventory in 2021 that became obsolete. How do I account for that? I do not see a spot to enter in discarded or donated inventory.

[tagteam]

This is extremely simple if you are keeping an inventory:

The discarded inventory drives your ending inventory down which, in turn, increases your cost of goods sold. The higher your cost of goods sold, the lower your gross profit. 

Of course, you need to do a year-end, physical inventory, but you should be doing that if you maintain an inventory. In the event your inventory is computerized and you do not take a physical count, you can simply reduce your ending inventory by the cost of the inventory you discarded.

[JulieS]

Discarded inventory is accounted for in the inventory calculation. It becomes Cost of Goods Sold.

For example say your beginning inventory is $20,000, about a quarter of that is old. You throw out $5000 of inventory. You ending inventory is now $15,000.

I am leaving out the normal things that affect your inventory such as sales and new purchases, just to keep the point clear.

[kimmie-mac-iclou]

Do you know if this would also be the spot to add in refunds given to customers during the year? For example if there was a customer complaint on a product so you gave them a refund. Or does this go under misc. expenses?

[tagteam]

Line 2 - Returns and allowances.

See https://www.irs.gov/instructions/i1040sc#en_US_2021_publink10008252

[kimmie-mac-iclou]

Thank you. When entering income online on TurboTax there is only a box saying type of income (I put 1099-k) and then a box for amount. I see you referred to line 2, since there is nowhere to enter line items online just the one box do we subtract the $ returns from the gross amount given on the 1099-k?

[tagteam]

I am not familiar with the online versions. Is there no section that resembles the screenshot below?

[kimmie-mac-iclou]

Found it! Under income you actually have to add a second line item (first is the 1099-k gross) called “add income for this work”. Seems backwards but once you add that line item you can select it to be rebates and refunds. 

Thank you for all of your help or I never would have arrived here!