Hi, I am a freelance musician, and in 2015 I began a recording project. Expenses related to the project include paying people like recording and editing engineers, musicians, professional historian, etc.

I have kept careful track of these expenses and issued 1099s when amounts exceeded $600; also filed form 1096.

My questions:

1. Since the project is not complete, but these expenses were incurred in 2015, I am imagining I'm allowed to include this project on my overall Schedule C as a freelance musician. Right?

2. Or I need to fill out a SEPARATE Schedule C and call it "____ Recording Project?"

3. Since the project has not completed, i.e. it has not been turned into a salable product yet, 2015 would only include expenses, not income. Am I required to amortize these expenses somehow, and if so, how?

I have kept careful track of these expenses and issued 1099s when amounts exceeded $600; also filed form 1096. =>No.Not exceed $600 BUT $600 or >$600.

My questions:

1. Since the project is not complete, but these expenses were incurred in 2015, I am imagining I'm allowed to include this project on my overall Schedule C as a freelance musician. Right?=>as a cash basis filer,most of sch C filers are cash basis filers, yes you CAN claim the expenses that ypu paid in 2015 on your 2015 return.

2. Or I need to fill out a SEPARATE Schedule C and call it "____ Recording Project?" =>Not necessarily; you may report the expenses on SCh C line 11 aslongas you issue them 1099mis s they are NOT your regular employees but a sort of independent contractors.

3. Since the project has not completed, i.e. it has not been turned into a salable product yet, 2015 would only include expenses, not income. Am I required to amortize these expenses somehow, and if so, how=>GOOD idea. As the expenses are AKA prepaid expenses, theycan be deducted only in the year to which it applies. For example, if you pay a 2-year lease in advance, you could only deduct the portion of the lease payment that applies to the current year.
However, there?s an important exception called the 12-month rule. It lets you deduct a prepaid future expense in the current year if the expense is for a right or benefit that extends no longer than the earlier of:12 months, oruntil the end of the tax year after the tax year in which you made the payment.
Say, You?re a calendar-year taxpayer and you pay $9k on Dec 31, 2015, for a business insurance policy that?s effective for one year beginning Jan 1, 2016 and ending on Dec 31, 2016. The 12-month rule applies. The benefit you?ve paid for?a business insurance policy--does not extend more than 12 months beyond Jan 1, 2016 (the first date you realized the benefit from the policy). Nor does it extend beyond the tax year following the year the payment was made (which would be tax year 2017 or later). Therefore, the full $9k is deductible in 2015.

1. Since the project is not complete, but these expenses were incurred in 2015, I am imagining I'm allowed to include this project on my overall Schedule C as a freelance musician. Right?=>as a cash basis filer,most of sch C filers are cash basis filers, yes you CAN claim the expenses that ypu paid in 2015 on your 2015 return.

2. Or I need to fill out a SEPARATE Schedule C and call it "____ Recording Project?" =>Not necessarily; you may report the expenses on SCh C line 11 aslongas you issue them 1099mis s they are NOT your regular employees but a sort of independent contractors.

3. Since the project has not completed, i.e. it has not been turned into a salable product yet, 2015 would only include expenses, not income. Am I required to amortize these expenses somehow, and if so, how=>GOOD idea. As the expenses are AKA prepaid expenses, theycan be deducted only in the year to which it applies. For example, if you pay a 2-year lease in advance, you could only deduct the portion of the lease payment that applies to the current year.
However, there?s an important exception called the 12-month rule. It lets you deduct a prepaid future expense in the current year if the expense is for a right or benefit that extends no longer than the earlier of:12 months, oruntil the end of the tax year after the tax year in which you made the payment.
Say, You?re a calendar-year taxpayer and you pay $9k on Dec 31, 2015, for a business insurance policy that?s effective for one year beginning Jan 1, 2016 and ending on Dec 31, 2016. The 12-month rule applies. The benefit you?ve paid for?a business insurance policy--does not extend more than 12 months beyond Jan 1, 2016 (the first date you realized the benefit from the policy). Nor does it extend beyond the tax year following the year the payment was made (which would be tax year 2017 or later). Therefore, the full $9k is deductible in 2015.

Thank you WnHough for explaining prepaid expenses. This recording project's prepaid expenses have many "line items," i.e. 1. Recording Engineer; 2. Editing Engineer; 3. Pianists; 4. Historian; et al-- that is why I felt it might be clearer to the IRS to create a second Schedule C, just for this recording project. Would you agree? My concern is naming the project and it's total expenses on one line of my "freelance musician" Schedule C, because it is a fairly substantial number of dollars, and I would imagine the IRS would want to know exactly in detail how I spent that money.