IRS Publication 334 — Tax Guide for Small Business (Schedule C)
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“Generally, you must pay SE tax and file Schedule SE (Form 1040) if your net earnings from self -employment were $400 or more. Use Schedule SE (Form 1040) to fig- ure net earnings from self-employment.”
You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. However, the following restrictions apply.
• If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. (See, however, Inventories, later.) You can use the cash method for all other items of income and expenses.
• If you use the cash method for figuring your income, you must use the cash method for reporting your expenses.
• If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income.
• If you use a combination method that includes the cash method, treat that combination method as the cash method.
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