Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax

HOW CAN I CORRECT A INCORRECT ENDING INVENTORY ACCUMULATED

Customer Question
HOW CAN I CORRECT A...
HOW CAN I CORRECT A INCORRECT ENDING INVENTORY ACCUMULATED OVER SEVERAL YEARS?
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: A physical inventory was never taken & % of cost was used. This exagerated the ending inventory. If it is corrected in 1 year a large loss is shown (audit??)
JA: Is there anything else the Accountant should be aware of?
Customer: The entity is in Hispanic grocery. Can the inventory be adjusted in more than one year?
Submitted: 1 year ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 19 minutes by:
9/30/2016
Tax Professional: Jonathan Tierney, Certified Public Accountant (CPA) replied 1 year ago
Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 322
Experience: Tax Accountant at Praxair, Inc.
Verified

Changing the way of determining ending inventory is an accounting method change that would require filing Form 3115 found here https://www.irs.gov/uac/about-form-3115 both with the tax return and separately with the Ogden, UT service center. It is easiest to apply for an automatic change of accounting method, a list them is included in the instructions to Form 3115 https://www.irs.gov/pub/irs-pdf/i3115.pdf. Each automatic change has a DCN number associated with it to the tell the IRS what type of change the taxpayer is making. The ones the seem the closest to your situation is DCN 54 described on page 15 of the instructions and DCN 204 described on page 22, though they do not seem to fit exactly. When an accounting method change is made an IRC 481(a) adjustment is made in the year the change is taking place which takes into account the cumulative change for all prior years and is shown as a separate line item on the tax return and Form 3115.

As an alternative to doing an accounting method change, you could file amended return return if all tax years are open that this situation occurred and spread the adjustment over several years arguing that by amending the returns you have always had a correct method, however I believe the Form 3115 method and reporting the change in the current year is the most technically correct method. You sound worried about an audit but it sounds like the IRS could not really come in to the store and find that it has much more inventory than it says currently, and they will be happy that you will be doing an inventory going forward.

I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions.

Thanks, Jonathan

Ask Your Own Tax Question
Ask Jonathan Tierney Your Own Question
Jonathan Tierney
Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 322
322 Satisfied Customers
Experience: Tax Accountant at Praxair, Inc.

Jonathan Tierney is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
Impact of tax changes on filing amended returns... Client
Impact of tax changes on filing amended returns... Client filed a 2016 tax return on time in 2017. If the tax laws change significantly, which laws apply when amended returns are filed... the tax laws… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,452 satisfied customers
Does the IRS ever do an audit that results in refunding
Does the IRS ever do an audit that results in refunding money back to the taxpayer AND then taking back any social security credits that might have been earned in error? It's a long story, but I'm sel… read more
socrateaser
socrateaser
1,031 satisfied customers
Joint WROS Fidelity: How to file taxes with this account?
A friend and I have a Joint WROS Fidelity account. My wife and I file Federal and State income tax jointly. Our friend does not file income taxes because the only source of income is Social Security. … read more
Bill
Bill
Master's Degree
2,278 satisfied customers
Filed W1040 for self-employment. Should I file amended return for HSH?
I was self-employed last year and I filed a W1040 tax form. Everything went through well. I did it through an H&R computer program. Currently I am in need of financial aid as I am going to college. I … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Does the IRS ever do an audit that results in refunding
Does the IRS ever do an audit that results in refunding money back to the taxpayer AND then taking back any social security credits that might have been earned in error? It's a long story, but I'm sel… read more
Amanda Russell
Amanda Russell
Accounting Tax & Profit Strategist
Master\u0027s Degree
9 satisfied customers
Is a tax return less likely to be audited if it's prepared
Is a tax return less likely to be audited if it's prepared by a CPA or simply a tax person? Secondly, our Rotary Club is a 401 C for we have a 401 c 3 Foundation the question is can individual members… read more
socrateaser
socrateaser
1,031 satisfied customers
Adjusted individual tax return for 2014(Iowa),says no
Adjusted individual tax return for 2014(Iowa),says no response to letter of inquiry,disallowed health insurance. deduction.says my wife and I owe$600.00.she called # and was told to show proof of insu… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
My relative has an IRS Audit. Her accountant said that he"
My relative has an IRS Audit. Her accountant said that he " procured her tax return account transcripts, and the Wage and Income transcripts that the IRS has to verify your tax return disclosures." Do… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Can a taxpayer file an amended return to elect into the
Can a taxpayer file an amended return to elect into the installment method if the original return was filed error without the installment method.… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
Summary: I did receive IRS audit for un-reported income for
Summary: I did receive IRS audit for un-reported income for year 2014. Details: my brother did taxi service and I did open square up merchant account so he can charge his customers using credit cards … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
ON A 1041 FORM IS THE TAX FIGURED ON ADJUSTED TOTAL INCOME
STEPHANIE, ON A 1041 FORM IS THE TAX FIGURED ON ADJUSTED TOTAL INCOME MINUS THE 4050 EXEMPTION? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
I have to file an amended return 2015. I used H&R Block tax
I have to file an amended return 2015. I used H&R Block tax software. Can I use H&R Block software to amended my return? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
When will 2015 amended returns be processed, I filed an
I filed an amended return 1 year ago. IRS has not yet begun processing. How long does it take? … read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,215 satisfied customers
I am filing an amended return that pertains to some patent
I am filing an amended return that pertains to some patent expenses (on schedule C) I did not expense on the original 1040 and 540 (they remained on the balance sheet). I have now expensed them and ha… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I have a question about the need to file an amended return.
I have a question about the need to file an amended return. Would this be something in your scope? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I'm wondering if I need to file an amended return. I e-filed
Hi! I'm wondering if I need to file an amended return. I e-filed yesterday, so I know I can't do anything for a while, but I wanted to make sure I'd need to file one in the future. … read more
Wallstreet Esq.
Wallstreet Esq.
Tax Attorney
Doctoral Degree
586 satisfied customers
Can amended returns be filed for an individual or person who
Can amended returns be filed for an individual or person who is currently deceased using 1040X? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x