What if I have inventory? How do I track that?
You should discuss this with your tax professional to determine how best to accomplish the goal of tracking your inventory purchases throughout the tax period and which method of valuing beginning and ending inventory is right for your particular circumstances. This tip will simply describe the simplest and most common way to use Deductr to track the necessary information to make accounting for inventory easier at tax time.
For tax purposes, inventory items are NOT deductible until sold.
The first step is to determine the dollar value of inventory items on hand at the beginning of the period you are tracking (consult your tax advisor on how to do this).
New purchases of inventory items during the period being tracked should be assigned to the "Inventory" category in Deductr, which is found under the Office and Administration grouping.
At the end of the accounting period, the dollar value of inventory items on hand is determined.
With the beginning and ending inventory on hand figures and the total inventory purchases made during the accounting period, your tax preparer can determine the proper amount to be used as the "Cost of Goods sold" figure.
The estimated taxes due and estimated tax savings calculations in Deductr are not designed to account for inventory purchases. However, these estimates will be close to the intended values if your beginning and ending inventory values are similar, (which generally means you carry a fairly consistent level of inventory on hand at any given time).
Consult your tax professional to see if this fits your circumstances. This is not to be taken as tax advice. Please refer to our End User License Agreement.