You can do this by running a query. First you'll want to choose Transaction Information from the Field Type dropdown menu. Choose Last Transaction Date in the Field dropdown menu and click Add Field Clause. Change the dropdown menu to say "Falls on or before." Change the radio option from Fixed to Relative and you'll want it to say "Relative 365 day or days prior to Today." Click Save and you should see your clause in the list. You'll also want to exclude constituents who are already inactive. Create another clause using the logics below:

Field Type: System
Field: Active Status
Not equal to Removed

Now you can create a group from your query results. Then follow the process outlined in How to mass remove constituents to have those constituents removed.