How to account for COGS when scrapping/selling inventory after closing jewelry business?

Thanks for the explanation. I'm curious though - since they're not actually selling the jewelry as products but scrapping the metals, would it still be considered "inventory" for COGS purposes? Or would it be more like selling a business asset?

It's still considered inventory for COGS purposes. Even though you're not selling the items as finished jewelry, you're liquidating inventory that was originally intended for resale. The IRS doesn't change the classification just because you're disposing of it differently than originally planned. Selling business assets would be different - that would be equipment, fixtures, or property used in the business rather than goods held for sale. Those would be reported on Form 4797 instead.

Did you find it was accurate? I've tried other tax software before and they messed up some of my business deductions. Can it handle special situations like business closures?

I'm curious about this too. Did it help with determining if you needed to file any special forms for shutting down a business? I've got a side hustle I'm closing and I've been told there's a bunch of paperwork.

I found it extremely accurate - it caught several deductions my previous tax software missed. It specifically has modules for handling business closures and unusual inventory situations. For special forms, it guided me through everything I needed for closing my business, including the final tax return requirements and how to handle remaining assets. It even provided me with a checklist of state-specific forms I needed to file since closing a business requires both federal and state notifications.

Wait, so they just call the IRS for you? How does that even work? The IRS phone system is notoriously horrible so I'm struggling to understand how a third party service can magically get through.

Sounds too good to be true. I've spent HOURS on hold with the IRS before. If this actually works, it would be amazing, but I'm skeptical. Did they charge you a fortune for this service?

They don't just "call for you" - they use an automated system that navigates the IRS phone tree and holds your place in line. When it detects that an agent is about to answer, it calls you and connects you directly. The technology is pretty clever actually. It absolutely works. I was connected to an IRS agent in about 2 hours instead of the days I'd spent trying on my own. The IRS agent even confirmed this is a legitimate service that many tax professionals use. I don't want to go into pricing details here, but I considered it completely reasonable for the time it saved me and the peace of mind of getting an official IRS response.

Good point! Do you know if there's a resource that lists the requirements by state? I'm in California and closing my small Etsy business, but haven't thought about state-specific forms.

Most states have a section on their Department of Revenue or Secretary of State websites dedicated to closing a business. For California specifically, you'll need to file a final state tax return and possibly file dissolution paperwork depending on your business structure. The California Tax Service Center (taxes.ca.gov) has a business closure checklist that's pretty comprehensive. Be sure to check if you need to file a final sales tax return too, especially since you were selling physical products on Etsy.

No, equipment and fixtures are handled differently than inventory. Those are considered business assets and their sale would be reported on Form 4797 (Sales of Business Property). You'll need to calculate if you're selling them for more or less than their depreciated value. If you've been claiming depreciation on this equipment over the years, you'll need to compare the sale price to the adjusted basis (original cost minus depreciation taken). If you sell for more than the adjusted basis, you might have to recapture some depreciation as ordinary income.

This is really helpful advice about documentation! I'm in a similar situation with closing my small retail business and hadn't thought about keeping detailed records from the liquidation process. Quick question - when you mention quarterly estimated tax payments, does that apply even if the business had a loss for the year? I'm assuming since the original poster had a $3,600 loss on the inventory, they might not owe additional taxes, but I could be wrong about how that works with other income sources. Also, did you find any specific IRS publications that were helpful for business closure procedures? I've been trying to navigate through all the different forms and requirements and it's pretty overwhelming.