Is this activity a qualified trade or business under Section 199A? I received some royalties from Amazon.com for my Kindle ebook publishing.

[bobi456]

Turbotax in the Fed review section asks me to answer Yes or No. “schedule C (Writing and publishing my own ebooks): Qualified business income - yes or no. We are missing some important info. Please return to your business and complete that topic. ” I’m not running a business, nor do I have a business license. But I am a writer who is slowly self-publishing my ebooks. I received a small amount from Amazon in 2022. Should I answer yes or no? Thank you.

[bobi456]

I asked this question via TurboTax online and it automatically put it under the wrong category. It should be under self-employment. 

[AliciaP1 · Accepted solution]

You may not think of yourself as running a business, but you’re considered self-employed if you engage in business-like activities.  The IRS has specific rules regarding treating income as business or hobby income.

To determine the difference the IRS considers these questions:

• Does the time and effort put into the activity indicate an intention to make a profit?
• Does the taxpayer depend on income from the activity?
• If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
• Has the taxpayer changed methods of operation to improve profitability?
• Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
• Has the taxpayer made a profit in similar activities in the past?
• Does the activity make a profit in some years?
• Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

 See Am I considered self-employed? for specifics.  If you are self-employed, then yes, your income is Qualified Business Income.  Also see What self-employed expenses can I deduct? for expenses you may be able to claim to help minimize the taxes you are required to pay.

If you can make the case that you are not self-employed, you will need to delete the entry of the form you received from Amazon and re-enter it to identify it as Hobby income.  Be aware, though, hobby income cannot be reduced by ordinary and necessary expenses like business income.

To delete and re-enter your form in TurboTax Online you can follow these steps:

1. Within your return, click on Tax Tools in the black menu on the left side of the screen.
2. Click on Tools.
3. Click on Delete a Form. 
4. Scroll down to your form and click Delete.
5. Under Federal in the black menu bar click Wages & Income to get back into your tax returns.
6. Click Edit/Add for your form 1099
7. Input the details of your 1099 and click Continue
8. Answer the questions and Continue until you get to the Does one of these uncommon situations apply? page
9. Choose This is not money earned as an employee or self-employed individual, it is from a sporadic activity or hobby (this is not common) and click Continue

[bobi456]

Thank you. That helps a lot!

[MoniqueLO_]

Thank you for your feedback. If you need help with anything else, please feel free to reach back out to us and we would be happy to assist you. 

@bobi456