Your Zine and the Taxman, cont'd
Schedule C - Heading
Take a look at the illustration above. Boxes A, C, and E are clear, but it's important to distinguish product vs. service. Different rules apply to each, if you're selling a product, specific accounting and inventory requirements must be met. Keep in mind that if you're a musician, photographer, writer, etc., you are offering a service, even though people are paying you for photos or articles. Also, just put "musician" or whatever it is you're doing, not the name of your band/project. Keep it simple. If you don't have any employees, leave box D blank. (If you do have employees, I hope you already have an accountant.) Box B is a code that helps the IRS classify you in a group with other businesses in similar fields. Here are some common ones:
0851 - printing and publishing
Box F covers accounting methods; most of you will be using cash. This means only income actually received is reported. Accrual means that all sales are reported, although payment may not have been received yet. If your business is selling a product, you must use the accrual method. If you are selling on consignment, you do not report a sale until you have received payment. Box G should be checked "yes". H is obvious.
Part I - Income
This is where you report your income (duh). For services, you just need to put the amount on line 1, and carry this amount to line 7. Businesses selling goods must complete the cost of goods sold section in Part III on the back of the form, which is not shown here. When reporting income, it's a good idea to report all payments made by check and all income from 1099s. (1099s are received by freelance employees instead of the customary W-2. The employer withholds no taxes, so it's your job to pay them! ) The reason for this is that if people are paying you with checks or using 1099s, the odds are good that they're reporting it to the government. So cover your ass!