topic QBI Deduction, freelanced for parent company of former employer in Deductions & credits

QBI Deduction, freelanced for parent company of former employer

Bombadillll — Sun, 22 Mar 2020 03:03:41 GMT

I'm still confused after hours of searching. I changed jobs mid-2019, from full-time at my previous employer to full-time at my current employer. I had one freelance gig throughout 2019 - a weekend's worth of live video editing for my previous employer's parent company. I signed a SOW (Statement of Work) with objectives and duties for the project I was working on.

In terms of the QBI (Qualified Business Income) deduction qualification questions, do I select "None" or "All" of this work was for a former employer?

The example provided prompted me to ask this question,

"Example: Juan worked as a graphic designer for ABC Company, but resigned to start working independently. ABC Company is one of his new clients for a single project under a contract clearly spelling out the specific project goals he is responsible for. This is a significant change from his previous employment for ABC Company, and doesn’t count as work for a former employer."

Re: QBI Deduction, freelanced for parent company of former employer

AnnetteB6 — Sun, 22 Mar 2020 13:50:35 GMT

Consider the nature of the work that you did for the freelance work. Was it closely related and very similar to the work that you did as an employee or was it a 'significant change' from your previous employment? Were you previously employed as a video editor or something else?

If it was closely related to your previous work as an employee, choose 'all' of the work was for a former employer. If it was significantly different, choose 'none'.

The reason this question is asked is so that it is not a tax advantage for a former employee to convert to an independent contractor in order to take advantage of the Qualified Business Income (QBI) deduction. The answer to the question will determine whether you are eligible for the QBI deduction.

Re: QBI Deduction, freelanced for parent company of former employer

Bombadillll — Mon, 23 Mar 2020 00:22:50 GMT

Thank you for the quick response, Annette - I really appreciate it.

To summarize in simpler terms, I've been working full-time at another company for 9 months now. I signed a contractual SOW for a freelance gig with the parent company of my previous employer. Does the fact that this was for the parent company, and not the subsidiary where I previously worked trump all else? The parent company and subsidiary have two different EINs.

Also, the example from TurboTax that I quoted above is similar to my situation, specifically signing a contract, so that's why I included it. Additionally, when I was employed at the subsidiary company full-time, I was a video editor but not a live video editor which entails quite a bit more stress and work.

Re: QBI Deduction, freelanced for parent company of former employer

AnnetteB6 — Mon, 23 Mar 2020 14:03:30 GMT

Given that the work was not for the same employer (different Federal ID numbers), the nature of the work was somewhat different, and you have a written contract, select None of the work was for a former employer.

@Bombadillll

Re: QBI Deduction, freelanced for parent company of former employer

Bombadillll — Tue, 24 Mar 2020 07:21:34 GMT

Thank you for your help, Annette.

Now I'm afraid I have a much bigger concern... I had completed everything and was ready to file, but received an error message saying that I didn't qualify to file using the Free File program. I used it last year having fallen on hard times. I don't see an option to upgrade. Is there any way to save all my hard work and import into another version of TurboTax Online?

Under the Tools Center, I see an option that says "Save your 2019 return to your computer". I clicked that and a file is saved to my computer called "taxReturn.tax2019", but I can't preview or open it. Another option under the Tools Center says, "Share my file with Agent". Would either of these options somehow help me salvage the nearly 20 hours I spent preparing my files?

Re: QBI Deduction, freelanced for parent company of former employer

DavidS127 — Tue, 24 Mar 2020 13:13:23 GMT

You can open the "*.tax2019" file with one of the TurboTax Download/CD versions. After the Download/CD version is installed on your computer, if it does not automatically find your *.tax2019 file, you can find the file and open it.