Self-employed income from theatre show on 1099-NEC - how to handle partner and actor payments?

You've got a classic self-employment situation here! Since you received a 1099-NEC, the IRS considers this your business income, but you're absolutely right that you can deduct legitimate business expenses. For the $1,350 paid to the partner theatre, that's a deductible business expense. You should categorize it as a contractor payment or partnership expense on your Schedule C. Make sure you have documentation of this arrangement and payment (emails, contract, canceled checks). For the actor payments, those are also legitimate business expenses. Since each payment was under $600, you weren't required to issue 1099s to them, but you should still keep records of these payments for your own tax filing. These would go on your Schedule C as well, likely as "wages" or "contract labor" expenses. The key is documenting everything. Keep a record of all income and expenses related to the production. You'll file Schedule C with your tax return to report this self-employment income and related expenses, which will reduce your taxable profit.

After dealing with similar indie theatre tax nightmares for years, I finally found something that helps make sense of all this. I use https://taxr.ai to help me figure out exactly how to categorize all these weird theatre payments and expenses. Upload your 1099, any agreements with the venue, and payment records, and it basically tells you exactly what to do. Last year I had this bizarre situation with a festival where I got a single payment but had like 8 different expense categories and profit-sharing with performers. The tool guided me through exactly how to handle everything for Schedule C. Saved me from the panic I used to feel every tax season.

Just wanted to update after trying taxr.ai! It was actually super helpful for my community theatre situation. I uploaded my production budget spreadsheet and the profit-sharing agreements, and it organized everything perfectly for Schedule C. It even flagged that some of my "props" expenses should actually be categorized as "costumes" for better tax treatment, which I never would have known. The best part was that it explained how to handle my weird situation where I both received a 1099 AND paid people out of that same money. Turns out I was doing it wrong for years. Definitely recommend it for anyone dealing with these theatre income/expense nightmares!

If you need to talk to someone at the IRS about this specific situation (which might be smart given the partnership aspect), good luck getting through to them. I spent 3 weeks trying to get clarification on a similar theatre income question. Finally used https://claimyr.com and got through to someone in under an hour. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was ready to just guess how to file, but actually speaking with an IRS agent made all the difference. They confirmed that my festival earnings were indeed Schedule C income and that I could deduct the payments to my collaborative artists as business expenses. Was worth it to get the official confirmation rather than guessing.

Well I have to eat crow here. After my skeptical comment, I decided to try Claimyr anyway because I had a similar question about royalty payments from a production I wrote. I expected to be disappointed, but I actually got through to the IRS in about 45 minutes (versus the 2+ hour wait times I've experienced before). The agent was surprisingly helpful and explained exactly how to report the mixed income/expense situation on my Schedule C. They even emailed me some reference materials about self-employment in the arts. So yeah, I was wrong - the service works as advertised and the IRS can actually be helpful for these specific questions if you can get through to them.

I've been doing small theatre productions for years. Here's what I've learned: you MUST keep extremely detailed records of everything. Not just the big payments, but every receipt for props, costumes, venue, etc. For your situation, create a spreadsheet with all income and ALL expenses, including what you paid to the partner theatre and actors. You'll report the full 1099-NEC amount on your Schedule C, then deduct all legitimate business expenses. The result is your actual profit, which is what you'll pay tax on. And don't forget about self-employment tax! That's an additional 15.3% on top of regular income tax, which catches a lot of first-timers by surprise.

Has anyone actually gotten audited for small theatre production income? I'm in a similar situation and wondering how detailed the IRS actually gets with these small creative projects.

This is exactly the kind of situation where keeping meticulous records from day one makes all the difference! I learned this the hard way after my first indie film project where I had similar income/expense confusion. One thing I don't see mentioned yet - make sure you're tracking your expenses by category that align with Schedule C categories. The IRS has specific line items for things like "advertising and promotion," "contract labor," "office expenses," etc. When you're organizing your theatre expenses, try to fit them into these standard categories rather than just lumping everything together as "production costs." Also, since this was your first time producing, you might want to consider whether this was a one-time thing or if you're planning to do more productions. If it's going to be ongoing, you should think about setting up proper business record-keeping from the start. It makes everything so much easier come tax time, and it shows the IRS that you're treating this as a legitimate business rather than just a hobby. The profit-sharing arrangement with the partner theatre is definitely deductible as you've been told, but document the business purpose clearly. Keep any emails, contracts, or written agreements that show this was a legitimate business arrangement, not just splitting money with friends.