This sounds like you are doing drop shipments.
Tell me, does any part of your money get paid to the source for product.
in otherwards, you may not be purchasing goods to resell, but you may be paying a pecentage of your gross to the source for ordering the product.
I appreciate your patience while I collect sufficient information to properly charachterize your income.
So you get paid a commission by the source or by the customers who pays you directly?
I am trying to understand here. YOu state you are a distributer. So do the customers pay you, and you keep the money?
Or the customers are pyaing the source and you get a percentage from the source?
Does the source report you income on form 1099?
Super, that is great information. I can deal with this now.
You did not get a 1099 because they are not required to give you a 1099 unless they pay you 600 dollars or more.
I do understand that you wish to capture the expenses of setting up business and so you need to file a schedule C. You claim the income of 50 dollars, and when you apply expenses, you will have a net business loss.
Since you do not maintain an inventory, you most likely do not have a cost of goods sold entry. The reason is that you would back out any labor costs for selling.
It may look odd, but in network marketing it is not unusual for a person to not have a cost of goods sold entry.
If the customer paid you for the product, and then you paid the source a price for the product, then what you paid would be considered part of the COGS. But in this case, the customer pays the source directly, and you collect a commission. Hence, no COGS.
If you counted as income all that the customers paid to the source, then you could list a cogs which would be what the customer paid minus your commission, but that is not how these transactions are set up.
What you describe does not appear to be of a nature to require a COGS. Essentially, you are in to direct sales. (another phrase to describe network marketing).
The IRS position on this is stated as:
As long as you started up the business with the intention of making a profit, and you are a cash accounting tax payer, with calender year reporting, you can report this in the year you incurred the expenses.
The 50 dollar check may be different.
The income you receive is counted in the year it was "constructively received".
This means, simply, when it was made available to you, regardless of when you may have actually received it.
So when you say it was paid to you, I have no idea what you mean by that.
In situations where a check is post marked before the end of the year, and dated in December, but not received until sometime in January, the IRS has ruled it was constructively received in the prior year.
My recommendation is if the check was postmarked and bears a 2008 date, that you should count it in 2008 income, regardless of when you might have received it.
See constructive receipt in this publication. http://www.irs.gov/pub/irs-pdf/p538.pdf