cost of goods sold

Forum|Forum|7 years ago
March 20, 2019
1 reply
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Can someone actually try and tell me if it is possible to write a negative number for line 36 of schedule C and it is ok? The other tax software I was using doesn't allow it. They say IRS doesn't allow negative there. But it doesn't make sense to me. (because if you pull more items from inventory than you purchase that year, that will be negative, such as pulling from existing inventory too) If we are able to do it with Turbotax, I will do it with Turbotax.

IsabellaG

Level 13

No, you can't do that. A negative number won't result if you do the computation correctly. The way the computation works is this:

Beginning Inventory (what you purchased before the beginning of 2018 that you didn't sell in 2017)

PLUS: Purchases (less items withdrawn for personal use) For this they mean subtract the items you withdrew for personal use from the purchases you made this year. Not what you took from last year's inventory. That part will come later.

MINUS: Ending Inventory (what you have left at the end of the year.

EQUALS: Cost of Goods Sold for the year.

If you pull more items from inventory than you purchased in 2018, you'll be pulling from your beginning inventory, so you need to reduce your beginning inventory by the amount you pulled. You'll have to check that your beginning inventory is different from last year's ending inventory, and attach a statement as to why. You can do all that in TurboTax.

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okatayAuthor

Level 2

okay now i understand thanks. so then really a negative number is not supposed to be on line 36 indeed - but we pull from beginning inventory. ok.... so with this attached statement, is it still possible to efile?

OR,

because there is an attached statement now, we will have to print and send by regular mail?