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Inventory Audit How can I justify my inventory in an audit where I was not holding inventory? I get checked on my cost of goods sold and my inventory. But I was just giving my preparer a rough estimate of how much inventory I have on hand. Is there any way I can justify this (by the laws or methods of inventory IRS) when I am asked to provide proof of the beginning and end inventory and evaluation of positions and I did not? If you have purchased on credit or debit card, you should have these items, or at least somewhere values (bank statement) which should be sufficient. sounds kind of SOL for me. You obviously can provide proof of termination inventory, if you have no way of accounting to record what has been sold, so that can justify what your opening stock looked like. If not, the IRS can not really audit documents that are not there and he probably will not go well. gl. Posted on September 3, 2010.
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