Is money I paid to contract labor considered my income first?

Question by strangemelodies: Is money I paid to contract labor considered my income first?
Example:

I have a home-office business for which I am sole proprietor. My business is a music studio where I teach piano, and I have someone else teaching guitar as an independent contractor. The total money I received from both piano and guitar students is $ 3,000. $ 2,000 comes from my piano students, and $ 1,000 comes from the guitar students of which I keep $ 250 and I give the guitar teacher $ 750. I sent him a 1099.

What is my total income that I put into Schedule C, $ 2,250 or $ 3,000?

I put the $ 750 under contract labor on Schedule C right?

Anything I should be aware of in this situation?

btw – I meticulously made sure we were following the rules for independent contractor as opposed to hiring him as an employee.

Thanks you, I love my Yahoo Answers community.

Best answer:

Answer by artillerygirl01
When you start filling out the Sch C, line 1, gross receipts, is where you will put the $ 3000. You always use the TOTAL amount of money your business received, then use your expenses to reduce that amount. Yes, the $ 750 will go under Contract Labor. You may have other deductible expenses that will help reduce your taxable income, but be prepared to have paperwork to back up any deductions.

What do you think? Answer below!