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Level 3
posted Dec 28, 2020 11:32:39 AM

Simplifying inventory accounting for LLC/S-Corp based on new TCJA inventory write off rules

I read that under the Tax Cuts and Jobs Act (TCJA), a retail owner can write off inventory for the year it is purchased, as long as the item is under $2,500 and their average annual gross receipts for the past three years are under $25 million. For 2020 I would like to convert to cash-based accounting and write off inventory cost as an expense. Is this advisable?

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2 Replies
Level 15
Dec 28, 2020 11:59:26 AM

@UCcpg wrote:

.....I would like to convert to cash-based accounting and write off inventory cost as an expense. Is this advisable?

You should seek an in-person consultation with a tax professional for guidance. 

 

If you have been using the accrual accounting method and want to change to the cash method, you will have to file Form 3115.

 

See https://www.irs.gov/instructions/i3115#idm140516454017040

Level 15
Dec 28, 2020 12:04:09 PM

Seek local assistance to be educated as you are mixing up 2 separate tax laws dealing with 2 separate tax issues.