Total cost of inventory purchased. Where should I have entered it?

[tommy8849]

This is my first year selling on ebay. I started on January 1 so I started with zero inventory. Under Schedule C inventory/cost of goods sold I only put the inventory cost amount I sold. My question I have filed my taxes, but where should I have put my total so I would have a carry over? It asked enter cost of purchases I entered only the cost that I sold. Where should I have entered the total cost? I guess once my return is process and I get my refund I need to amend?

[tagteam]

You started with 0 inventory so you only need to add your cost of purchases and then subtract your ending inventory to get your cost of goods sold. You ending inventory this year will be your beginning inventory next year.

[ThomasM125]

When you click on "Inventory/Cost of Goods Sold" in the business section of TurboTax, if you report that you have inventory, you will be asked to enter your beginning inventory and end of year inventory.

Your ending inventory will carry over as your beginning inventory for next year. The value of your ending inventory will be subtracted from the cost of your purchases in the current year and the beginning inventory will be added to your cost of purchases.

[Carl]

This is my first year selling on ebay. I started on January 1 so I started with zero inventory.

That is correct. First, some terminology definitions.

BOY Inventory balance - BOY stands for Beginning of Year. The amount entered here is what *YOU* paid for the inventory in  your physical possession on Jan 1, 2019. Since 2019 was your first year dealing with inventory, your BOY balance "MUST" Be zero. Doesn't matter if you actually purchased that inventory 50 years ago.

Cost of Goods Sold (COGS) - The amount entered here is what "YOU" paid for the inventory you "actually sold" during the tax year. It doesn't matter in what tax year you purchased and paid for that inventory either.

EOY Inventory Balance - EOY stands for End Of Year. It's what "YOU" paid for any inventory in  your physical possession on Dec 31 of the tax year.

Under Schedule C inventory/cost of goods sold I only put the inventory cost amount I sold. My question I have filed my taxes, but where should I have put my total so I would have a carry over?

That's your EOY Inventory Balance.

Note that your BOY balance absolutely must, with no exceptions, match your previous year's EOY balance. Since 2019 was your first year dealing with inventory, that's why your BOY balance "MUST" be zero, because there's no questioning that your 2018 EOY balance was zero, since your business did not exist, or did not report inventory in 2018. Here's some examples of how this works.

BOY Inventory Balance - $0 Even if I had inventory that I purchased in 2018, since I didn't open my business until 2019 the BOY has to be zero. Period.

COGS - $1000  This shows that "I" paid $1000 for inventory that I "actually sold" in 2019.

EOY Inventory Balance - $2000 shows that on Dec 31 of 2019 I still had $2000 of inventory in my physical possession on that date.

So the above shows that I started my business with $0 inventory, purchased a total of $3000 of inventory in 2019, sold $2000 of that inventory leaving me with $1000 of inventory left over on Dec 31, 2019.

Then for 2020:

BOY Inventory Balance - $1000 Note this batches the prior year's EOY balance. If it does not, then you'll have some 'splain' to do to the IRS, and I don't care what you say, they will not accept "any" reason or excuse your provide.

COGS - $5000

EOY Inventory balance - $4000

The above shows I started the year with $1000 of inventory, purchased an additional $8000 of inventory during the year for a total of $9000 in inventory for 2020. I sold $5000 of that inventory leaving me with an EOY inventory balance of $4000.

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[Carl]

This is my first year selling on ebay. I started on January 1 so I started with zero inventory.

That is correct. First, some terminology definitions.

BOY Inventory balance - BOY stands for Beginning of Year. The amount entered here is what *YOU* paid for the inventory in  your physical possession on Jan 1, 2019. Since 2019 was your first year dealing with inventory, your BOY balance "MUST" Be zero. Doesn't matter if you actually purchased that inventory 50 years ago.

Cost of Goods Sold (COGS) - The amount entered here is what "YOU" paid for the inventory you "actually sold" during the tax year. It doesn't matter in what tax year you purchased and paid for that inventory either.

EOY Inventory Balance - EOY stands for End Of Year. It's what "YOU" paid for any inventory in  your physical possession on Dec 31 of the tax year.

Under Schedule C inventory/cost of goods sold I only put the inventory cost amount I sold. My question I have filed my taxes, but where should I have put my total so I would have a carry over?

That's your EOY Inventory Balance.

Note that your BOY balance absolutely must, with no exceptions, match your previous year's EOY balance. Since 2019 was your first year dealing with inventory, that's why your BOY balance "MUST" be zero, because there's no questioning that your 2018 EOY balance was zero, since your business did not exist, or did not report inventory in 2018. Here's some examples of how this works.

BOY Inventory Balance - $0 Even if I had inventory that I purchased in 2018, since I didn't open my business until 2019 the BOY has to be zero. Period.

COGS - $1000  This shows that "I" paid $1000 for inventory that I "actually sold" in 2019.

EOY Inventory Balance - $2000 shows that on Dec 31 of 2019 I still had $2000 of inventory in my physical possession on that date.

So the above shows that I started my business with $0 inventory, purchased a total of $3000 of inventory in 2019, sold $2000 of that inventory leaving me with $1000 of inventory left over on Dec 31, 2019.

Then for 2020:

BOY Inventory Balance - $1000 Note this batches the prior year's EOY balance. If it does not, then you'll have some 'splain' to do to the IRS, and I don't care what you say, they will not accept "any" reason or excuse your provide.

COGS - $5000

EOY Inventory balance - $4000

The above shows I started the year with $1000 of inventory, purchased an additional $8000 of inventory during the year for a total of $9000 in inventory for 2020. I sold $5000 of that inventory leaving me with an EOY inventory balance of $4000.

[tommy8849]

Great response. Can you tell me where I should have put the total cost on schedule C of inventory I purchased? So I would have carried forward the difference. I only put cost what I paid and sold. I need to amend now to correct this? 

[tagteam]

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@tommy8849 wrote:

It asked enter cost of purchases I entered only the cost that I sold. Where should I have entered the total cost? 

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That is actually the key; you should have entered the total cost of your purchases in "Cost of Purchases".

The formula is actually very simple:

Beginning Inventory  PLUS  Cost of Purchases MINUS Ending Inventory EQUALS Cost of Goods Sold.

[tommy8849]

Thank you so I need to go back and amend my taxes to get my cost of inventory to carry forward for next year? 

[Mitch-K]

I buy/resell items from garage sales, estate sales, etc.

1)  I started selling in tax year 2020, filed a 1040-C, but didn't bother to report any COGS.  I understand my BOY for 2021 has to be 0.

2) I'm selling items I've accumulated in the past many years.  I know exactly how much I spent on additional inventory in 2021.  That's the only dedication I'm interested in.  But I haven't tracked whether the items I sold in 2021 were purchased in that year or in some prior year.

Can I still I calculate a COGS figure for 2021?  Thanks in advance!

[ErnieS0]

Yes. You can add accumulated items as current year purchases if they are now available for sale. You can't add them to beginning inventory unless you amend your 2020 return.

[Carl]

Just keep in mind that your end of year balance will reflect to total cost of your inventory you still had on hand on Dec 31 of that tax year, regardless of what tax year it was purchased in.