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posted Apr 8, 2025 9:16:06 PM

Can't use Accrued COGS on IRS 1125-A COGS?

RE: IRS Form 1125-A Cost of Goods Sold.
A bookkeeping client primarily sells rare coins inventory and uses the accrual accounting method for their small LLC with $150k in sales.  So it seems reasonable to file taxes with accrual financial reports. However, the IRS Form 1125-A Cost of Goods Sold does not allow accrued COGS to be matched against 2024 sales. I don't get it. The form's formula completely misrepresents and miscalculates a much lower COGS - so their taxability is increased. Bottom line - I am looking for someone to explain why we can't use accrued COGS, and/or what are better options.
Thanks!

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1 Replies
Expert Alumni
Apr 13, 2025 7:38:48 AM

Here is the steps for entering the COGS.  The inventory should calculate based on the selection of accural or cash basis.  With your return open, select the Business tab and select I'll choose what I work on.

  1. On the Let's gather your business info screen, select Start or Update next to Profit or Loss from Business under Business Income and Expenses.
  2. On the Your Business screen, select Start/Update next to either Inventory/Cost of Goods Sold or Other Common Business Expenses depending on how you chose to report your inventory costs.
    • If you don't have inventory but want to report materials and supplies as COGS, select Inventory and then enter 0 for both beginning and ending inventory values.
    • If you chose "Other Common Business Expenses," select Supplies on the next screen.
  3. Follow the onscreen instructions to completion.