I run a very small photography business on the side. I'm reporting my income and expenses for the business on Schedule C. I carry a small inventory of framed photographs. TurboTax is asking for the value of my inventory. Is the value of my inventory the total cost of what the inventory COST ME or is the value of the inventory the total of what I CHARGE to my customers?
Thank you.
It's going to be your inventory costs to you, not the retail value if you are using the cost method (most common) of reporting.
Here's the how inventory is used to calculate cost of goods (COGS) sold: Beginning inventory + purchases - ending inventory = COGS.
EX: If you began your business in 2017, beginning inventory would be 0 + the costs of your frames, etc - ending inventory mounts. Some numbers: 0 + $2000-$1800=$200 COGS
I started my business this year. I had no inventory to start and now have $862.79 in finished art, $716.31 in materials that are directly used for the art, and $795.09 in expenses to set up and create (work lamp, drying racks, etsy fees, gloves, etc.). In the TurboTax Deluxe, I see the question "What was the value of your inventory at the end of 2019?" Is that asking for the finished at and materials or something else?
Your inventory would be the finished art and the materials used directly in creating your art ($862.79 + 716.31 = $1,579.10). The other items you mention (work lamp, etc.) are considered expenses. Larger purchases (usually more than $2,500), which last more than one year, would be considered assets and should be depreciated over time. Examples include:
As you go through the interview, TurboTax will ask you about your expenses and assets.
NOTE: If you are using the online version of TurboTax Deluxe, you will be asked to upgrade to the Self-Employed version in order to enter your expenses.