adamrice wrote:and just a couple of days ago, I asked myself "myself, how am I going to account for the incoming money on my taxes?"
Disclaimer-Not a tax guy, never done a big project, but have done my share (probably 20) of Schedule C's and lived in Texas.
I'd treat it as a SchC business.
In a business, the goal is to make a profit but if you don't, there's nothing wrong with breaking even or showing a loss, so don't feel that you have to "profit" to avoid scrutiny by the IRS. Also, keep in mind that profit will be taxed AND subject to ~15% FICA.
I'd go to the county clerk, register a Fictitious Name (minimal cost), and then do your project.
Set up a separate paypal account and run as much income and outlay through it as possible.
Open a separate bank account if you feel you must, but as long as you keep good records, money going in and out of your personal account shouldn't be a problem.
I've made mistakes on Schedule C's in the past and the only thing the IRS wanted clarification on were specific items- I was never flagged for audit.
I'd just be sure not go wild with expenses....like deducting a trip to Stonehenge to evaluate the possibility of a similar project at Enchanted Forest.
EDIT: If (as Trilo suggests), there is a possibility that you will end up personally shouldering a major loss, I'd talk to a tax guy to see what extent you will be able to deduct it.
As I was typing my response, I was thinking "Large project = $10,000-$20,000". If more than that, I'd definitely
talk to a tax guy.