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Deducting Inventory

Birmingham
Level 2

I understand if you deduct all inventory when paid, that you must report it the same way on your financial statements. What about if you just choose  the option to deduct the non-incidental materials and supplies once they are consumed into the final product....could you still included those deducted amounts on your financial statements as inventory?

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IntuitJim
Employee
Employee

Possibly- it is an either / or, not a both requirement for small taxpayers. According to Publication 334 (2018), Tax Guide for Small Business, if you are a small business taxpayer (average annual gross receipts of $25 million or less for the 3 prior tax years), you can choose not to keep an inventory, IF your method of accounting for inventory treats inventory as non-incidental material or supplies, OR conforms to your financial accounting treatment of inventories.

For more detail, see: https://www.irs.gov/publications/p334#en_US_2018_publink1000313270

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IntuitJim
Employee
Employee

Possibly- it is an either / or, not a both requirement for small taxpayers. According to Publication 334 (2018), Tax Guide for Small Business, if you are a small business taxpayer (average annual gross receipts of $25 million or less for the 3 prior tax years), you can choose not to keep an inventory, IF your method of accounting for inventory treats inventory as non-incidental material or supplies, OR conforms to your financial accounting treatment of inventories.

For more detail, see: https://www.irs.gov/publications/p334#en_US_2018_publink1000313270

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