Hi guys,

I have a problem that I have not been able to figure out.

I have partnership that has less than 1 Million income. I know that we are allowed to use the cash method for our accounting purposes. When filling out the 1065 we are told to fill out the 1125 (inventory) form. The only way to fill out that form is the use the accrual method.

What am I supposed to do if I want to use the cash method? I don't want to have to pay taxes on inventory that I have not yet sold.

I really appreciate your help.

Jonathan.

you do not pay taxes on inv. That you have not yest sold. Form 1125-A details the computation of a business’s cost of goods sold.your ps must complete and attach Form 1125-A if the biz reports a deduction for cost of goods sold.so aslongas your biz reports cogs, you need to file the form with 1065.your biz has no cogs aslongas it is service biz however, aslongas it sells goods; If your biz sells customers/ clients physical items, it is selling goods. As a result, it has cost of goods sold ; the amounts it paid to obtain those goods and to prepare them for sale.y

Would you be able to explain that better?

We sell shirts so we have an inventory that we have not yet sold.

Do I need to fill out the 1125?

Thanks!

i guess so;you donot ypay tax on inv not yet sold. you need to file the form aslongas you have cogs in your biz. you are are a retailer, your cost of goods sold is equal to the cost of its beginning inventory plus the cost of its net purchases (the combination of these is the cost of goods available) minus the cost of its ending inventory aslongas you use periodic inv system.your cogs is also the cost of the net purchases plus or minus the change in the inventory during the accounting period.

Cost of goods sold can only be calculated for businesses that carry inventory to sell. COGS is often included in a company's monthly profit and loss statement.so sa said, your biz must complete and attach Form 1125-A if the biz reports a deduction for cost of goods sold