With TurboTax Online, you can easily report damaged/obsolete inventory. Since damaged inventory cannot be used in the business, it is considered "Shrinkage" which is an expense that can be offset against revenues that you earned for the year. To start, sign into TurboTax Online, choose your tax return for the year, then:
> On the left navigation pane, click Income, then Self-Employment, then Business or Professional Activities
> Here would be your business list, choose your business and on the very right side there should be an "edit" button, click this so you could report the obsolete inventory. If you don't have a business yet, you can go ahead and enter a new business and fill out the necessary information with the wizard.
> We will be entering the Income and Inventory section, click continue twice.
> To input the $ amount of your obsolete inventory, you can do it in 2 ways:
1. You can put the total amount of shrinkage as the difference between beginning inventory and closing inventory.
2. Or you can simply put the total amount of shrinkage in "Other Costs"
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