COGS-style expenses for properties sold last year have been invoiced to us this year (common for homebuilders). 2025 taxes have already been filed. I understand that COGS must be claimed in the same year as the property is sold. How do we proceed? The same thing has occured for the last few years with COGS expenses coming in the year after a property is sold. Must we ammend our taxes or is there another solution? Thanks so much!

You're right that COGS generally needs to be matched to the year the property is sold, which creates a real headache when invoices arrive late. The good news is you have a couple of paths forward, and amending may not always be required.

The most straightforward option is filing an amended return (Form 1040-X for individuals, or the equivalent for your entity type) for each year the COGS was understated. This directly corrects the mismatch and gets you the deduction in the proper period. Given this has happened for multiple years, you'd potentially be amending several returns, which is tedious but doable within the three-year statute of limitations for refund claims.

The other option worth exploring is whether your business can adopt the accrual method of accounting, if you aren't already using it. Under the accrual method, expenses are recognized when the obligation is incurred, not when the invoice arrives or the cash is paid. If your contracts create a fixed liability in the year of sale, you may be able to accrue those costs in that year even without the invoice in hand, as long as the amount is reasonably estimable. This is actually the more defensible long-term approach for a homebuilder, and it would solve the recurring nature of this problem going forward.

If you're already on accrual and still getting this wrong, that's a different conversation about your internal processes for estimating closing costs and subcontractor liabilities at year-end.

I'd strongly recommend working with a CPA who specializes in construction or real estate to review your accounting method election and whether a formal change (Form 3115) makes sense.