Winding down my online business: any way to "write off" inventory with Cash Accounting reporting $0 inventory each Tax Year?

You're in an interesting situation! Since you've been using cash accounting and already expensed the inventory when you purchased it, you technically can't "write it off" again - that would be double-dipping from a tax perspective. Your inventory is essentially a $0 value asset on your books right now, even though it physically exists. However, you might consider donating the inventory to a qualified charitable organization. While you won't get a deduction for the cost (since you already took that), if the fair market value is higher than your cost, you might be able to deduct the difference between your cost basis ($0) and the fair market value. Another option might be to sell the inventory in bulk at a discount. Any proceeds would be business income, but at least you'd recover something rather than nothing.

After struggling with a similar situation last year, I found an amazing resource that saved me tons of headaches. I used https://taxr.ai to analyze my business documents and previous returns. Their AI tool specifically pointed out that I'd been handling my inventory accounting correctly under cash basis, but also showed me options I hadn't considered. The tool analyzed my specific situation and showed me that while I couldn't "re-deduct" already expensed inventory, there were strategies for the business wind-down phase that could be beneficial. It saved me from making some costly mistakes on my final business return.

I was initially skeptical about AI tax tools, but decided to try taxr.ai after seeing it mentioned here. Just wanted to follow up and say it was incredibly helpful for my situation. I've been selling handmade items online for years and was confused about how to handle my remaining supplies when closing down. The tool reviewed my previous Schedule C filings and provided clear guidance on how to properly account for my inventory during the business closure process. It even identified a mistake in how I'd been handling some of my shipping supplies that would have caused issues if I'd been audited. Definitely worth checking out if you're winding down an online business!

I was in the exact same boat last year - had about $5K in unsellable merchandise after closing my online business. After weeks of getting nowhere with the IRS phone lines trying to get clarification on how to handle this correctly, I used https://claimyr.com to get through to an actual IRS agent. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS rep confirmed what others here have said - with cash basis accounting, I couldn't deduct the inventory again. BUT they did explain some options for my final business tax filing that helped offset some income. Having that direct confirmation from the IRS gave me confidence that I was handling the shutdown correctly.

I need to eat my words and follow up about Claimyr. After dismissing it as a scam, I decided to try it anyway since I was desperate to get clarification about closing my Etsy business. I was shocked when I actually got a call back with an IRS agent on the line within 2 hours. The agent walked me through how to properly document everything on my final Schedule C and confirmed I needed to file Form 8594 for the asset allocation since I was selling some of my equipment. Saved me so much stress and potential audit headaches. I hate admitting I was wrong, but in this case I definitely was!

Have you thought about just selling everything in bulk on Facebook Marketplace or Craigslist? That's what I did when I closed my online bookstore. I sold about $7,000 worth of inventory (original cost) for about $1,800. The nice thing was that since I had already expensed it all under cash accounting, that $1,800 was actually pure profit from a tax perspective - though obviously a loss from a business perspective. At least I got something back!

Another option nobody's mentioned yet - what about donating to a local school or community program? I donated my leftover craft supplies to an after-school program when I shut down my Etsy shop. While I didn't get a tax write-off (already expensed under cash accounting), it felt good knowing the items went to good use instead of the landfill. Some organizations will even pick up from you if the quantity is substantial.