Preparing Taxes with Inventora
How to get the inventory data you need to make filing your taxes a breeze
Note: This is not legal or tax advice and you should consult an accountant if you have additional questions, and about whether your business is required to track inventory for tax purposes. Also, this is focused primarily around United States tax code, so you should research your specific local jurisdiction, or country if outside the US.
You can easily find your starting & ending inventory in Inventora on the Reports page (More > Reports). You will need to be on the paid plan, as the free plan only has access to current data, and not the historical data we need here.
- 1.
- 2.Scroll to the very bottom, where you'll see "Inventory Breakdown"
- 3.Change the date to the first day of your fiscal year at 12:00am. This would be 1/1/2021 if you're doing taxes for 2021, and you pay taxes based on the calendar year.
- 4.You should see 2 numbers: Materials Total Value and Products Total Value
- 5.Add these numbers together to get your starting inventory
- 1.
- 2.Scroll to the very bottom, where you'll see "Inventory Breakdown"
- 3.Change the date to the first day of the following fiscal year at 12:00am. This would be 1/1/2022 if you're doing taxes for 2021, and you pay taxes based on the calendar year.
- 4.You should see 2 numbers: Materials Total Value and Products Total Value
- 5.Add these numbers together to get your starting inventory
In Inventora it's easy to find the total value of materials & finished products purchased during the year, also on the reports page.
If you make your products out of raw materials, then you'll want to know how much you spend on materials.
- 1.
- 2.For the 2021 tax year, change the date range to 1/1/2021 through 1/1/2022
- 3.Scroll down to the "Material Reports" section
- 4.Find the "Materials Purchased" section
- 5.Your total materials purchased will be the large black number
If you order finished products to sell, then you'll want to track how much you spend on these, similar to raw materials.
- 1.
- 2.For the 2021 tax year, change the date range to 1/1/2021 through 1/1/2022
- 3.Scroll down to the "Products Reports" section
- 4.Find the "Products Purchased" section
- 5.Your total products purchased will be the large black number
If you're based in the United States, then the most common tax document you'll need to prepare as a small business is the Schedule C (Form 1040). There are several sections of this tax form, but we'll be talking specifically about Section III - Cost of Goods Sold.
Here are the values we recommend:
- 33. Method(s) used to value closing inventory
- Cost
- 34. Was there any change in determining quantities, costs, or valuations?
- Yes if previously used something other than Cost, otherwise No
- 35. Inventory at beginning of year
- See above
- 36. Purchases less cost of items withdrawn for personal use
- See "Finished Product Purchases" above
- 37. Cost of Labor
- Inventora does not currently track labor cost, so you should calculate this separately. If you're the business owner, the form recommends not including your own time.
- 38. Materials & Supplies
- See "Materials Purchases" above
- 39. Inventory at end of year
- See above
If you have questions about any of this, we recommend speaking to a certified tax accountant. We also recommend that you double check your numbers before submitting, as the cost of errors and omissions on taxes can be costly.
Last modified 1yr ago