question regarding inventory on 1040 schedule C

[wasatchm]

I realize that it asks for beginning and end of year inventory for the schedule C.

I always put 0 even if I have inventory.  can someone tell me why the IRS want's to know the beginning and ending inventory?

and is there an real benefit for someone like me who doesn't have a lot of inventory at the lest of the year (probably less than 10K worth) the put the actual inventory on my schedule C instead of just putting 0.  I just like to keep things simple.  

thanks

[7606dennis]

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@luckythewinner wrote:

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@7606dennis wrote:

if memory serves, are required to use the accrual method as opposed to the cash method.  There is also the matter of accounting for inventory such as first in, first out etc.

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Your memory does not serve. 

The publication 334 link I posted above explains that qualifying taxpayers (under $1 million in sales and not tax shelters) can:

"use the cash method of accounting even if they produce, purchase, or sell merchandise. These taxpayers can also account for inventoriable items as materials and supplies that are not incidental"

This means they can choose NOT to use the accrual method, and they do not have to account for inventory other than by expensing the cost of an item in the year it is sold. 

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It is probably good that I use an accountant to handle my tax & accounting needs then.  I would suggest that the OP do the same.

[7606dennis]

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@wasatchm wrote:

thanks.  I have posted some of these questions on some accounting forums also

and gotten some good responses.  but sometimes their just to technical to explain something in lay mans terms.  

I just bought a book 

"How To Start And Run Your Own Corporation: S-Corporations For Small Business kit".   

I hope it's provides some useful insight on running a single member LLC S corp.

I will certainly be putting together a list of questions  to ask a CPA.   I am going to give myself about a week to get all the questions together and then hopefully I won't realize after I have visited with the CPA that I forgot to ask him some very important questions.

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When it comes to setting up corporations, I would also suggest that you consult an attorney and a CPA.