I am a longtime plumber, about to become self employed, as a single-member LLC. I will be filing a 1040 with schedule C. I am trying to familiarize myself with schedule C now, so I won’t go crazy come tax time. The issue I am struggling with is COGS and how it relates to inventory. Although I am primarily a service business, I do keep a stock or inventory of materials on my work truck, such as pipes, valves and fittings, so I can do common plumbing repairs. Obviously, it would be very inefficient to have to go out to get materials for each job. Since I qualify as a small business taxpayer, I can expense my material purchases immediately, and the IRS won’t require me to keep a strict, actual inventory. (I will be using cash based, not accrual based, accounting.) That’s great, since it simplifies accounting. But won’t it complicate things when I go to calculate COGS come tax time? I also think this method assumes I won’t be holding any inventory from one year to another. I have spent the last several weeks making materials purchases to stock my truck, and plan to start taking service calls in November, so I will definitely not be using all the material I bought by the end of the year. So how do I calculate the materials I use on jobs, when I calculate COGS at tax time? Will I need to maintain an actual physical inventory? That will eat a lot of time, and I’m hoping to avoid it, but maybe I have no choice?