I am concerned about filing my client's return with so high COG compared to income. Is it wise to make a statement explaining the timing for prepayment of construction costs? The difference will show in this next year's tax filing, showing more income than COG. Is it better to be proactive and make a statement or wait for a letter requesting more information?
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No one at IRS reads statements filed with returns.
You can leave a message for God at the Wailing Wall. But you can't leave a message for IRS.
Thank you for your response!!!! Makes sense 🙂
Are you reporting the prepayment as COGS in the year paid, or in the year the project sold? Is the prepayment for goods, services, permits, infrastructure?
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