In example 3 of How Small Businesses Can Expense Inventory Costs, we used an IRS example to show how a business could receive and pay for $500,000 of goods on December 20 and deduct them.

That article in last month’s issue drew a thoughtful response from a tax professional, who wrote:

IRS Pub 334 (page 16) states: “Exception for small business taxpayers. If you are a small business taxpayer, you can choose not to keep an inventory, but you must still use a method of accounting for inventory that clearly reflects income.” The instructions for the Schedule C state the same thing.

It is a fair point, and the sentence reads ominously ... Log in to view full article.