Visitor II

Inventory change statement

Not real sure how to do this or fix it.
It’s asking to enter it. But I m not comprehending what the other boards say. Can some one dumb it down for me?
1 Comment
Catalyst V

Inventory change statement

You forgot to provide any details for anyone to work with. So I'm making wild guess assumptions here based on no facts.

Assuming you are self-employed and report your business income/expenses on SCH C as a part of your personal 1040 tax return, Inventory is dealt with in the COGS (Cost of Goods Sold) section of the TurboTax program. The issue you are experiencing is that your 2017 beginning of year inventory does not match your previous year's end of inventory balance. You got some 'splainin' to do to the IRS as you why that is. I seriously doubt you have a reason the IRS will accept too.

Here's the breakdown.

Beginning of Year (BOY) Inventory - What *you* paid for the inventory in your physical possession on Jan 1 of the tax year. In what year you purchased this inventory flat out does not matter. You could have purchased it 50 years ago. This value must match the previous year's EOY Inventory. If it does not match, you got some 'splainin' to do to the IRS, and most likely your explanation will not be accepted and the IRS will "make it match" and then fine/penalize you for false reporting of your BOY inventory.  If this is the first year your business has inventory, then your BOY Inventory ***MUST*** be zero. That's the only possible way for it to match the previous year's EOY inventory, since this year is the first year your business acquired inventory.

Note that what you paid for your inventory, regardless of what tax year you paid it, is not deductible until the tax year you sell that inventory. 
End of Year (EOY) Inventory - What *you* paid for the inventory in your physical possession on Dec 31 of the tax year.

COGS (Cost of Goods Sold) - What *you* paid for the inventory that you actually sold during the tax year.

Here's some examples of how this works.

BOY Inventory - $0

COGS - $5000

EOY Inventory $4000

The above shows that at the start of the year I had nothing in inventory. Then throughout the year I purchased a total of $9000 of inventory. In that same year I sold $5000 of that inventory leaving me with a balance of $4000 in my inventory on the last day of the tax year.

BOY Inventory $4000

COGS - $3000

EOY Inventory - $5000

The above shows that at the start of the year I had $4000 in inventory. This absolutely *must* match my prior years' EOY Inventory balance. If it does not, I better have a good reason and chances are I can't think of one the IRS will buy off on.

Next, doing the math shows that throughout the year I purchased an additional $4000 of inventory bringing my total inventory for the tax year to $8000. Also in that same tax year I sold $3000 of that inventory, leaving me with a balance of $5000 of inventory at the end of the year.