Where Can I Find the 1125-A Form for Filing?

Businesses that need to report the cost of goods sold must complete IRS Form 1125-A as part of their tax filings. This form ensures accurate reporting of inventory-related expenses, which can significantly impact taxable income. Failing to include it when required may lead to errors in tax calculations or potential audits.

Applicable Filers

Form 1125-A is required for businesses that report inventory costs. This applies to corporations, partnerships, and certain sole proprietorships using the accrual method of accounting. The form calculates the cost of goods sold (COGS), which directly affects taxable income. Companies in manufacturing, wholesale, retail, or any industry where inventory is a major component must complete this form if they file IRS Form 1120, 1120-S, or 1065.

Businesses with average annual gross receipts exceeding $27 million (as of the 2024 tax year) must use the accrual method, making them more likely to need Form 1125-A. Smaller businesses that voluntarily use inventory accounting or are subject to industry regulations may also need to file it. The Tax Cuts and Jobs Act (TCJA) introduced exemptions for some small businesses, allowing them to use the cash method instead, but those with significant inventory operations often stick with accrual accounting for consistency with financial reporting.

Locating the Form

Businesses required to file Form 1125-A must obtain the correct version to comply with IRS regulations. The form is available through the IRS website, mail requests, and third-party providers.

Official Website

The IRS website (www.irs.gov) offers a free, downloadable PDF version of Form 1125-A. Users can find it by searching “Form 1125-A” in the IRS search bar or navigating to the “Forms & Instructions” section. The site also provides instructions for completing the form correctly.

Tax forms are updated periodically, so businesses should verify they are using the correct version for the applicable tax year. The IRS typically releases updated forms in the fourth quarter of the preceding year. Using an outdated form can lead to processing delays or errors. The IRS also provides fillable PDFs, allowing businesses to enter data electronically before printing and submitting the form.

Authorized Mail Requests

Businesses that prefer a physical copy can request one by mail through the IRS’s “Order Forms by Mail” page or by calling 1-800-TAX-FORM (1-800-829-3676).

Mailed forms take approximately 10 to 15 business days to arrive, so businesses should request them well in advance of tax deadlines. While this option ensures an official copy, downloading the form online is faster for those with urgent filing needs.

Third-Party Providers

Tax software providers and accounting firms also offer access to Form 1125-A. Platforms like TurboTax Business, H&R Block Premium & Business, and Drake Tax integrate the form into their corporate and partnership tax filing packages.

These services include step-by-step guidance and error-checking features, which can help businesses unfamiliar with tax reporting. Some providers charge fees for access to tax forms or electronic filing. It’s important to verify that the provider is authorized by the IRS, as unauthorized sources may distribute outdated or incorrect versions. The IRS maintains a list of authorized e-file providers on its website.

Document Preparation Steps

Before completing Form 1125-A, businesses must have accurate financial records detailing inventory transactions. The IRS requires businesses to use a consistent inventory valuation method unless approval is granted for a change.

Common valuation methods include First-In, First-Out (FIFO), Last-In, First-Out (LIFO), and the specific identification method. Each affects taxable income differently. LIFO can reduce taxable income during inflationary periods by matching higher costs with revenues, while FIFO results in higher reported profits when prices rise. Businesses must disclose their chosen method on their tax return.

Inventory purchases, direct labor costs, and overhead expenses must be properly categorized. Costs directly tied to inventory production or acquisition must be included, while selling and administrative expenses must be excluded. Manufacturers must allocate factory rent, utilities, and depreciation to inventory, while retailers focus on purchase costs and freight expenses. Errors in these calculations can lead to IRS scrutiny, so reconciling financial statements with tax records is essential.

Supporting documentation is critical. Businesses should retain invoices, purchase orders, and inventory reports that substantiate reported figures. Accounting software like QuickBooks or Xero can generate inventory summaries that align with tax reporting requirements. Reports should detail beginning inventory, purchases, cost adjustments, and ending inventory. Any inconsistencies can raise red flags during an audit. Businesses claiming inventory shrinkage due to theft, obsolescence, or damage must provide supporting evidence, such as loss reports or insurance claims.

Filing Requirements

Form 1125-A must be submitted with the corresponding tax return: Form 1120 for C corporations, Form 1120-S for S corporations, and Form 1065 for partnerships. Since it directly impacts taxable income, discrepancies between reported inventory expenses and financial statements can trigger IRS scrutiny. The total cost of goods sold reported on Form 1125-A must match the corresponding line item on the primary tax return.

Filing deadlines vary by entity type. C corporations operating on a calendar year must file by April 15, while S corporations and partnerships must file by March 15. If an extension is needed, Form 7004 allows for an automatic six-month extension, but any taxes owed must still be paid by the original due date to avoid penalties and interest. Late filing penalties can be steep—partnerships face fines of $220 per partner per month for failing to file a complete return, while corporations may incur penalties based on the unpaid tax amount.

Key Attachments

Businesses may need to provide additional documentation to support the reported cost of goods sold. While the IRS does not require specific attachments in every case, having supporting records available can help prevent disputes during an audit.

Inventory valuation reports are among the most important attachments. These reports detail how the business calculated beginning and ending inventory, including adjustments for shrinkage, obsolescence, or write-downs. Companies using the lower of cost or market (LCM) method must provide evidence supporting any reductions in inventory value. For example, if a retailer marks down unsold seasonal merchandise, it should retain records of the original purchase price and the adjusted valuation. Businesses using LIFO must also attach Form 970, Application to Use LIFO Inventory Method, if they have not previously elected this method.

Supporting schedules for direct costs, such as materials, labor, and overhead, may also be necessary. Manufacturers should maintain detailed cost accounting records that allocate expenses appropriately. If a company includes factory rent and utilities in inventory costs, it should provide a breakdown of these allocations. Businesses claiming deductions for damaged or lost inventory should retain insurance claims, police reports, or internal loss documentation. While these records are not filed with Form 1125-A, they must be available if the IRS requests them.

Retention Guidelines

Businesses must retain tax-related documents for at least three years from the date the return was filed or the due date, whichever is later. If income is underreported by more than 25%, the statute of limitations extends to six years. If fraud is suspected, there is no time limit for IRS review.

Copies of filed tax returns, supporting schedules, and all inventory-related records should be kept. Digital record-keeping solutions, such as cloud-based accounting software, help keep records accessible and organized. Certain industries, such as pharmaceuticals and food production, may have additional retention requirements. The FDA, for example, mandates longer record-keeping periods for inventory related to regulated products.