To exempt your 1099-NEC from self-employment tax:
- Type 1099-NEC is Search in the upper right
- Click Jump to 1099-nec
- Say Yes to Did you get a 1099-NEC?
- Select Add a 1099-NEC on Do You Want to Enter Your 1099-NECs Now?
- Enter your information. Continue.
- Fill in why you received the 1099-NEC in Describe the reason for this 1099-NEC. Continue.
- Select None of these apply to me on Does one of these uncommon situations apply?
- Select I don’t have expenses related to this income on Guess what? You can deduct expenses
Selecting expenses will generate self-employment tax.
Internal Revenue Code section 3401(c) indicates that an “officer, employee, or elected official” of government is an employee for income tax withholding purposes. However, in some special cases the law or a Section 218 Agreement may specify otherwise.
The courts generally define "public official” and “public officer” to mean anyone who exercises significant authority pursuant to public laws. This includes any official who administers or enforces public laws whether the public elected the individual or an office appointed them.
Regulations for section 1402, addressing the applicability of self-employment tax, indicate that performance of the functions of a public office does not constitute a trade or business. Therefore, holders of “public office” are not subject to self-employment tax. An exception applies for certain public officials paid solely on a fee basis. All other holders of public office, paid on a salary basis, are excepted from self-employment tax and are presumed to be employees receiving wages.
Refer to Tax Withholding for Government Workers.
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