1) Game development is your source of income, you could disclose it further, and specify that you’re making porn games, but I don’t think it’s necessary for the tax preparer to know the list of all kinks, fetishes in your games. Also find a tax preparer you could really trust, or file taxes yourself
2) You could lie, or tell them the truth. Some people are fine with it, others are not.
3) I do feel guilt, but I would rather feel guilt than hunger, homelessness, untreated medical issues
You could easily make ~$100k a year working 12 hours a day with this job, which is ok in todays economy, but you have to make some moral, ethical trade offs I guess.