Fill out Part III of Schedule C form 1040 Cost of goods sold:
- If you manufacture products to sell
- Or If you purchase products to resell
- And you keep inventory
- You use a standard accounting method to value your inventory. Accrual method is recommended.
File form 3115 if you would like to change your accounting method.
How to Fill Out Schedule C Form 1040 Profit or Loss from Business – Part III –Cost of Goods Sold
Line 35: Start inventory: count physical products at the end of December or 1st day of January
Line 36: Evaluate your purchases of your inventory items or to produces them. Subtract from that cost the cost of items taken out of inventory for personal use
Line 37: if you have employee other than yourself, put the payroll cost here.
Line 38: material and supplies: Enter the cost of raw materials used in the production and the cost of supplies used to store the finished products in inventory. If packaging is necessary to store the products right after they were produced, the cost of packaging should be included here. Do not list cost of material and supplies used to ship products to customers
Line 39: Other costs: enter any costs close related to the products in inventory.
Line 41: inventory year end: count your inventory at the end of December.
Line 42: Cost of goods sold: The difference between the total on line 40 and line 41 would be the cost of goods sold. After you filled out schedule C Form 1040 Part III- cost of goods sold, enter the amount from line 42 on Part I line 4 of Schedule C.
How to Fill Out Schedule C Form 1040 Profit or Loss from Business – Part III –Cost of Goods Sold by Liberman Consulting L.L.C.
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