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jbluwalcostumer

Solved

Is this activity a qualified trade or business under Section 199A?

Forum|Forum|3 years ago
March 4, 2023
3 replies
0 views

I don't know what this means

TurboTax Self Employed Online

Best answer by MonikaK1

TurboTax is asking for this information in order to determine whether to calculate the Section 199A deduction based on any net profit from your business or rental activity.

A qualified trade or business is any section 162 trade or business, with three exceptions:

A trade or business conducted by a C corporation.
The trade or business of performing services as an employee.
For taxpayers with taxable income that exceeds the threshold amount, specified service trades or businesses (SSTBs).

Please see this help article, this IRS FAQ page, and this IRS webpage for more information.

MonikaK1Answer

TurboTax is asking for this information in order to determine whether to calculate the Section 199A deduction based on any net profit from your business or rental activity.

A qualified trade or business is any section 162 trade or business, with three exceptions:

A trade or business conducted by a C corporation.
The trade or business of performing services as an employee.
For taxpayers with taxable income that exceeds the threshold amount, specified service trades or businesses (SSTBs).

Please see this help article, this IRS FAQ page, and this IRS webpage for more information.

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jbluwalcostumerAuthor

Nope. Still don’t understand. Speak to me like a child. In the simplest and easiest of terms. No big words, no tax codes, or tax jargons. Do I mark yes, or no? If you can’t explain it that way, then no answer is going to help me.

KrisD15

When you have a business, you could qualify for Section 199A also know as the Qualified Business Income Deduction.

A few years back the tax code was adjusted so that corporations got a 20% tax break, so to make it fair to Businesses that are not Corporations, they set this up.

Self-Employed Taxpayers can get up to a 20% credit (tax -free income) for their business income (and sometimes rental income).

Most Taxpayers that file Schedule C qualify.

Farms that are for-profit qualify.

Rental income does not count unless you are running the rental as a business. You would have to be a Real estate Professional or spend a significant time dealing with the rental.

The tax law is pretty sloppy on this one as far as what businesses qualify, so rather than explain what qualifies, the easier thing to do is say what doesn't.

Most ALL self-employed taxpayers qualify EXCEPT

Specialized Service Trade Or Businesses.

According to the IRS:

“An SSTB is a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading or dealing in certain assets, or any trade or business where the principal asset is the reputation or skill of one or more of its employees or owners. The principal asset of a trade or business is the reputation or skill of its employees or owners if the trade or business consists of the receipt of income from endorsing products or services, the use of an individual's image, likeness, voice, or other symbols associated with the individual's identity, or appearances at events or on radio, television, or other media formats.”

SSTB

Not Actors

Not Doctors

Not Attorneys

Not Accountants

Not Athletes

If you are still uncertain if your business qualifies, you can tell us what that business is and we should be able to give you an answer.

If you qualify for the deduction, the TurboTax program computes it for you and enters it on your 1040 line 13.

@jbluwalcostumer

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showmotorsdetailing

My boyfriend and I are the two shareholders of our S-corp LLC. We do mobile detailing and boat cleaning services. We do not have employees. We actively participate in the business. In fact, we are the only two that actually perform the detailing work, so the both of us are very much an integral part of the business operations.

I'm trying to find out if "this activity" is a "qualified trade or business" under Section 199A. There is a lot of confusion about what meets the criteria. I want to make sure I answer this correctly, especially if it will lower my tax bill.

Is there an income threshold that determines this for those that are on the fence? Any clarity would be greatly appreciated.

RobertB4444

You are a Specialized Service Trade or Business which definitely qualifies you for the QBI deduction.

Here are the IRS definitions of a qualified business.

However, the deduction phases out at higher income levels. At $182,100 for individuals and $364,200 for married couples there is no QBI deduction anymore.

@showmotorsdetailing

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sethandsarah

Hello,

I received a 1099 Misc for my school counseling internship paid for under the HB22-1220 Educator Stipend for the state of Colorado. Would this be a qualified business?

DianeW777

No. A stipend would be considered as Other income, but is not a qualified business.

Stipend Definition: Stipends are not considered compensation for work: Unlike a salary, which is a set amount paid for work performed, a stipend is monetary support for expenses or training.

Other Miscellaneous Income:

Sign into your TurboTax Online account
Go to Tax Home (left panel) Wages and Income section
Scroll to Less Common Income > Select Miscellaneous Income, 1099-A, 1099-C
Select Other reportable Income > Enter a description (----) and the amount
For TurboTax Desktop > Income > Scroll to Less Common Income > .......