Should I amend my 2019 return or do it on my 2020 return

[pattycake8989]

I closed my direct sales business in 2019 but I wasn't aware that my EOY inventory needed to be at 0. So my Schedule C from 2019 shows an ending inventory. Do I need to amend my 2019 return or carry it forward as BOY inventory on my 2020 return and make sure 2020's end of year inventory is at 0 by transferring it all for personal use? How will this affect my refund...will I have to pay taxes on the inventory that I transfer for personal use?

[ColeenD3]

You can do either. The main reason to answer the question is to answer the follow-up question.

If you’re self-employed and simply stopped doing this type of work, answer Yes here.

You'd also answer Yes if you own a business and you did one of these things:

• Closed the business
• Sold the business
• Lost the business in a fire or other disaster
• Retired from this business

[pattycake8989]

I closed the business due to not enough business to make a profit. I did not sell the business.

[pattycake8989]

I didn't sell the business, I closed it. I suffered a loss three years in a row so I wasn't generating enough income to sustain the business. If I cancel out the inventory for personal use on my 2020 taxes, will I have to list expenses and costs as though I was still in business? I am worried about doing that since it will show a loss for a 4th year in a row. Or should I amend my 2019 return to cancel out the inventory for personal use. Will that affect my tax refund I received for 2019? If you recommend amending 2019 return, can I do it through my 2019 Turbotax software or do I need to do it manually?

[ColeenD3]

Don't worry about a 4th loss. The rule that the IRS expects a profit in three out of every five years, is that they don't want people to create a business to have a continual loss and reduce other taxable income. You are closing your business which shows that that is not your intention.

If you feel better amending 2019, then do that.