I retired in June after years as an full-time employee (W2). From July I provided 1 day/week advice/training to my replacement and received a 1099NEC. Is this QBI income?

[AliciaP1 · Accepted solution]

Yes, this would be considered consulting self-employed income and is considered a qualified business for the QBI deduction.

[Kiwienergy]

Thanks very much

[Hal_Al]

Maybe not. The general rule is  you may not claim QBI on income for a job where you were once a W2 employee. 

Under the regulations issued by the IRS, if you are working for a former employer as a contractor, doing substantially the same work that you did as an employee, you are ineligible for the QBI deduction for 3 years after you stopped being an employee.

I don't think  the fact that you formally retired changes that. 

Refernce: https://ttlc.intuit.com/community/taxes/discussion/qbi-for-independent-contractor/00/1083355

[Kiwienergy]

Thanks for your reply Hal_Al. Sounds like the URL was for an employee who changed the way they were paid.

I should have clarified....

I formally resigned and finished my full time role on June 30 where i ran a small business.

Starting July 1, I acted as an advisor-consultant (a few hours a week) providing strategic advice to the small business. I did not continue my original role or have client/project responsbilities/relationships. Instead I only provided strategic consulting advice and guidance for a few hours a week. 

Would this new consultant role qualify as QBE income?

[Hal_Al · Accepted solution]

That's subject to interpretation.  Certainly the intent was not to circumvent the rules. But, my opinion is the time proximity says you don't qualify.

The final regulations include a presumption that an individual who was previously treated as an employee and is subsequently treated as an independent contractor while performing substantially the same services for the same employer or a related person will be presumed to still be in the trade or business of performing services as an employee for purposes of Sec. 199A. The final regulations were modified to include a three-year lookback rule for this presumption. The individual can rebut the presumption by showing records that corroborate the individual’s status as a nonemployee, such as contracts or partnership agreements, that are sufficient to corroborate the individual's status as a non-employee . 

Reference: https://www.journalofaccountancy.com/news/2019/jan/sec-199a-qbi-deduction-201920483.html

I take that to mean, if you claim it, be prepared to prove you qualify.  But, that's true about any thing you claim in taxes. 

This reference says "the final regulations contain an additional example demonstrating the application of the presumption for the situation in which an employee has materially modified his relationship with his employer such that the employee can successfully rebut the presumption". But I couldn't find a actual copy of the final reg.   

https://www.federalregister.gov/documents/2019/02/08/2019-01025/qualified-business-income-deduction