'Materially Participate'

[PlzStopLobbying2MakeTaxesHard]

Am I going crazy? The responses in the top thread about 'What does 'materially participate' mean?' are pretending like they provide a clear answer.

Look at this winner of a line in there:

"Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who didn’t own any interest in the activity."

That sentence is nonsense. Even my 4th grade English teacher would tell me to rewrite that.

Our country needs to make taxes easier. Can't believe I've paid TurboTax $69 and I'm stuck posting here because they still didn't help me get through this.

[DawnC]

The tax key is:  A trade or business activity isn’t a passive activity if you materially participated in the activity.   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity.   To see how the IRS 'sums up' material participation, see Pub 925 (section is linked).    

[PlzStopLobbying2MakeTaxesHard]

I appreciate your fast reply, DawnC, but I'm sorry, I'm just a normal human who was hired by a business to sell hot sauce at a farmer's market, and this answer doesn't make any of that clearer.

Additional context: my employer sent me one tax form (1099-NEC) and there is nothing else written on it other than their address, federal ID number, and how much I earned.

RE: Pub 925, I appreciate you took the time to setup a special link that highlights the relevant section, but a) that is the same response being repeated in other threads about this subject, and b) Pub 925, item #2 is literally the same obscure language that my original post is critiquing (see the quote that I mention there).

How could someone write the sentence in Pub 925, #2 and think it was understandable for the average person? It almost feels like the people who write tax stuff make it difficult to understand on purpose. (Hmmm, wait...Intuit lobbyists can't possibly be involved in this regard. No...)

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As a followup, I couldn't find a straight answer online to how I should answer this, nor any of the other Schedule C questions that were not clearly answered via the form my employer gave me.

Also, note that in order for TurboTax to give me the option to file Schedule C in the first place, I had to pay $69 for their 'Deluxe Edition'.

Schedule C was the worst experience I've had with TurboTax in 6 years of using it. You know how TurboTax provides lots of helpful 'have a question?' icons, explanations, etc. every step of the 1040 process? All of that evaporated as I soon as I agree to pay the Deluxe fee and we enter the Schedule C portion. The screens Turbo Tax shows you for this are a little difficult to describe, but it basically looks like they import a screenshot of the actual tax form, and then put a little dropshadow around the screenshot. There were no helpful context popups for any of the Schedule C items. The only reason I even found this forum is because of searching Google!

Anyways, after 30 minutes of desperate Google searches (and remember, me paying TurboTax $69 for 'Deluxe), I still did not have any clear answers on how to fill out this Schedule C. I made my best guesses and submitted my taxes as-is....and now I've just been notified 'Something went wrong'. 

If you've read this far, cheers. Here's hoping that taxes can be done easier one day, with easy to understand language, and without private interests like TurboTax. 

Ps. DawnC, I know this isn't your fault directly. If you could pass my feedback somewhere that'd be great. Best wishes

[AnnetteB6]

Some aspects of the tax code are certainly harder to understand than others.  Based on the questions you posted, you are filing a Schedule C as a self-employed person because the business that paid you did not consider you to be their employee.  If you were an employee, you would have received a W-2 instead of a Form 1099-NEC.  

That being said, because you received the Form 1099-NEC it is reported on a Schedule C for self-employment.  The Schedule C is reporting income and expenses from your business.  Your business is to provide a service for the hot sauce company.  In simple terms, you did materially participate in your own Schedule C business because you worked to make that income and you did not sit back and have someone else do it for you.  

@PlzStopLobbying2MakeTaxesHard 

[AmeliesUncle]

Unfortunately, we are often 'stuck' with how Congress writes the law (or the Treasury Department writes the Regulations).  Your example is a classic case of that.

[PlzStopLobbying2MakeTaxesHard]

Thank you for explaining that more thoroughly, AnnetteB6. Whelp, I answered this incorrectly on my taxes, then. I went through the same checklist DawnC mentioned above, the one that's supposed to help you determine if you 'Materially Participated', and I didn't have a 'yes' to any of those scenarios. 

Would have been nice if TurboTax explained like you did. Or at least made some kind of attempt to explain at all, ha. As I mentioned above, Section C in TurboTax 'Deluxe' was devoid of any help tips. It also did not explain what to do if there are no other details on your 1099-NEC other than income amount.

Does TurboTax give refunds for their $69 'Deluxe' option in scenarios like this? I don't feel like they provided the service they stated they would. 

[PlzStopLobbying2MakeTaxesHard]

Hi AmeliesUncle, who is 'we' in your statement?