Dave T Posted March 16, 2022 Report Share Posted March 16, 2022 I think there may have been a thread on this awhile ago but not sure. T/P has full time job but also does consulting work for former employer. Former employer gives him a 1099-NEC which I know of course in subject to S/E tax but the question is does this go on Sch. C and qualify for QBI ? Thanks Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 17, 2022 Report Share Posted March 17, 2022 Yes, it goes to schedule C. QBI depends on the other rules, such as profession and total income for your client. 1 Quote Link to comment Share on other sites More sharing options...
TAXMAN Posted March 17, 2022 Report Share Posted March 17, 2022 I think I read on one of the boards or somewhere that if you had a sch C you could get QBI assuming you met the other rules. Quote Link to comment Share on other sites More sharing options...
TexTaxToo Posted March 17, 2022 Report Share Posted March 17, 2022 One of the "rules" is that you can't be in "the trade or business of performing services as an employee" which some have taken to mean that you cannot switch from being an employee to being a contractor to take advantage of QBI. The regs say there is a "presumption that former employees are still employees" for three years, but that it can be "rebutted" - see https://www.law.cornell.edu/cfr/text/26/1.199A-5#d_3 Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 17, 2022 Report Share Posted March 17, 2022 The argument could be made that since he changed full time jobs the three year presumption shouldn't apply. The argument could also be made that even though he changed full time jobs, he is still an employee of his former employer. It really would depend on the specifics of his arrangement with his previous employer. Quote Link to comment Share on other sites More sharing options...
Dave T Posted March 17, 2022 Author Report Share Posted March 17, 2022 Yes, would agree with the fact that he has now has another full time job. In addition he is beyond the 3 year period and has just maintained the relationship with the former employer in a highly technical field Also, in the first few years after leaving he continued to consult and received a w-2. This is the first year of receiving a 1099. Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 17, 2022 Report Share Posted March 17, 2022 If he has always gotten a W-2 from this employer, it does look suspicious to suddenly get a 1099-NEC for 2021 from that same employer for what are probably similar consulting services in that highly technical field. Quote Link to comment Share on other sites More sharing options...
Lee B Posted March 17, 2022 Report Share Posted March 17, 2022 35 minutes ago, Lion EA said: If he has always gotten a W-2 from this employer, it does look suspicious to suddenly get a 1099-NEC for 2021 from that same employer for what are probably similar consulting services in that highly technical field. The key question will be, "Does he do Consulting work for more than one company and receive a 1099 NECs for that work?" Quote Link to comment Share on other sites More sharing options...
Lion EA Posted March 17, 2022 Report Share Posted March 17, 2022 Yes, does he act like he has a consulting business, multiple clients, holding himself out as a consultant, consulting contracts with clients, invoicing them, basically acting like he's in the business of consulting? Quote Link to comment Share on other sites More sharing options...
Dave T Posted March 17, 2022 Author Report Share Posted March 17, 2022 Good points Lion and cbslee, No his only client is his former employer. So based on this then, no QBI but obviously S/E? And then, if not QBI does the income need to be reported on Sch C or just as other income? Quote Link to comment Share on other sites More sharing options...
Pacun Posted March 17, 2022 Report Share Posted March 17, 2022 22 hours ago, Pacun said: Yes, it goes to schedule C. QBI depends on the other rules, such as profession and total income for your client. Quote Link to comment Share on other sites More sharing options...
Terry D EA Posted March 19, 2022 Report Share Posted March 19, 2022 On 3/17/2022 at 11:04 AM, TexTaxToo said: One of the "rules" is that you can't be in "the trade or business of performing services as an employee" which some have taken to mean that you cannot switch from being an employee to being a contractor to take advantage of QBI. The regs say there is a "presumption that former employees are still employees" for three years, but that it can be "rebutted" - see https://www.law.cornell.edu/cfr/text/26/1.199A-5#d_3 So, this would apply to a statutory employee as well correct? A statutory employee is not a "Trade or Business". Quote Link to comment Share on other sites More sharing options...
TexTaxToo Posted March 19, 2022 Report Share Posted March 19, 2022 1 hour ago, Terry D EA said: So, this would apply to a statutory employee as well correct? Not necessarily. See https://www.journalofaccountancy.com/issues/2019/jan/qbi-deduction-for-statutory-employees.html 1 Quote Link to comment Share on other sites More sharing options...
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