Question regarding filling out SCHEDULE C?

Question

Thanks for all answers I received previously.

Let me elaborate my situation. Me & my wife purchased a small convenience store without realestate under propriety ownership that sells beer, wine, candies, etcetera. last September & want to do my/our own taxes this year for the first time. We have no employees. The store is located in Los angeles, California. I heard that we need to fill out 1040, schedule C, schedule SE & california tax form 540. Specific question I have is on SCHEDULE C ON questions #35 & 41. How do I determine the inventory since the store has thousands of merchandise(beer, wine, candies, etc) & me and my wife are the only workers. Do we need to count each item one by one? That'll take us feel like eternity since we don't have employees. Is there another method? Can we say inventory is same since we kept buying merchandises for 4 months & ended up with about same amount of merchandises on December as we started on September?

Thanks in advance for all answers.

Jerry Gitomer · Accepted Answer

Since you are operating a retail business the safe harbor rule does not apply and (quoting JK Lasser's Your Income Tax) "The IRS requires inventories at the beginning and end of every taxable year in which the production, purchase, or sale of merchandise is an income-producing factor." It goes on to say "If you must keep inventories you must use the accrual basis".

In simple english, given your lack of experience, this means you NEED the services of a CPA.

Question regarding filling out SCHEDULE C?

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