For Tax Year 2019, I started a thread and received instructions how to handle royalty income distributed by my uncle from my grandparents' books. I have been following advice from that thread for the last 3 tax cycles.
https://ttlc.intuit.com/community/taxes/discussion/heir-to-book-royalties-distributed-by-a-fellow-he...
I just received a notice from IRS that calculated self employment tax that they propose that I owe from my line entry for book royalties. My entry is in Schedule 1, line 8 and has the additional text "Book Royalties." From the bit of research I've done on this message board, I don't believe the royalty income I receive is subject to self employment tax. The books that are generating royalties are several decades old at this point and the income is not a significant part of my family's overall income.
The notice shows the amount that IRS believes I owe, and a payment deadline of Aug. 24 to avoid further interest. It also says, "If you believe the amount on Schedule 1, line 8 isn't subject to SE tax, send us a signed statement explaining why and include supporting documentation."
So my questions are:
- Was Schedule 1, line 8 the correct location to enter this income?
- Am I correct that I should not owe SE tax on this income?
- If yes to both, do you have suggestions for what supporting documentation to include? (I have the checks, a letter from my uncle, bank statements, etc.)
Thank you!
