Cost of Goods Sold on Business Tax Forms

Question: Cost of Goods Sold on Business Tax Forms

Cost of goods sold (COGS) is a calculation of the value of a company's inventory that has been sold and which remains to be sold. COGS is shown in a similar way on each type of business tax return. On each return, cost of goods sold is a reduction in business income, so the higher you can legitimately make cost of goods sold, the less income you will have to pay taxes on.

Answer:

How Cost of Goods Sold is Calculated on Business Tax Returns

Schedule C - Profit or Loss From Business for Form 1040 for Sole Proprietors and Single-Member LLCs
Schedule C is used to calculate the net income (profit or loss) of a small business. The result of the calculation of cost of goods sold is shown on Line 4 of Part I. The calculation is shown on Line 42 on page 2).

Form 1120 U.S. Corporation Income Tax Return
Form 1120-S is used to calculate the net income (profit or loss) of a corporation. The result of the calculation of cost of goods sold is shown on Line 2 of Part I - Income. The COGS calculation is detailed on Schedule A.

Form 1065 U.S. Return of Partnership Income
Form 1065 is used to calculate the net income (profit or loss) of a partnership. The result of the calculation of cost of goods sold is shown on Line 2 of Part I - Income. The COGS calculation is detailed on Schedule A.

Business Tax Returns for Limited Liability Companies
A single member LLC (SMLLC) files a business tax return as a sole proprietor, using Schedule C. A multiple-member LLC files a business tax return as a partnership, using Form 1065.

Read more about cost of good sold, including how to calculate this amount and how to keep records for cost of goods sold.