Do I need to report inventory?

by TurboTax•219• Updated 1 week ago

Large businesses that purchase, produce, and sell merchandise to generate income usually keep inventory and use the accrual method of accounting. The inventory's value at year-end is subtracted from its value at the start of the year (plus purchases made during the year) to arrive at the cost of goods sold (COGS) for that year.

However, if your business' annual gross receipts for the last three tax years average out to $30 million or less per year, you can opt to use the cash method and expense the cost of inventory at the time it was purchased, rather than waiting until after it's been sold.

In TurboTax, you can report these costs in the inventory section as COGS or in the expenses section as supplies. Either way, you don't have to report inventory but you do need to carefully track what you paid for the products, materials, and supplies that go into your inventory.

Reporting inventory costs in TurboTax Online

Open or continue your return.
Go to Schedule C.
- If you're new to this section, we'll ask for info about your business first. Eventually, we'll ask if you had any business-related expenses; answer Yes.
- Otherwise, select Review next to your business and then the Add Expenses for this work button.
When you get to the First select the expenses you know you had screen, scroll down and select either Supplies or Inventory.
- If you don't have inventory but want to report materials and supplies as COGS, select Inventory and then enter 0 for both beginning and ending inventory values.
Follow the onscreen instructions to completion.

Reporting inventory costs in TurboTax Home & Business

With your return open, select the Business tab and proceed to the Let's gather your business info screen.
- If you haven't entered any business info yet, select Start in the first section, Business Income and Expenses and provide the requested info.
- Otherwise, select the Update button and then Edit on the following screen.
On the Your Business screen, select Start/Update next to either Inventory/Cost of Goods Sold or Other Common Business Expenses depending on how you chose to report your inventory costs.
- If you don't have inventory but want to report materials and supplies as COGS, select Inventory and then enter 0 for both beginning and ending inventory values.
- If you chose "Other Common Business Expenses," select Supplies on the next screen.
Follow the onscreen instructions to completion.