QBI

[reformedattorney]

I have a consulting business whose QBI is subject to the phaseout limitations. My wife and daughter have always assisted with administrative activities for the business. I have traditionally filed a 1099 for my daughter's paid work, but since my wife and I file joint/married, I've never done a 1099 for her. If my QBI reaches phaseout territory, is it permissible to do a 1099 for her representing the financial value of her activities for the business, with both of us then filing Schedule C's with income for each that is below the phaseout limit? Thanks for any guidance you can provide.

[ThomasM125 · Accepted solution]

The income limitations for qualified business income (QBI) deduction purposes are based on your adjusted gross income, so splitting the income up by applying it to schedule C's may not help you. 

Unless your spouse or daughter operated their own business, it would not be appropriate to treat them as subcontractors. If you direct their work, they would probably be considered employees in the eyes of the IRS, so it may be more appropriate to issue them a W-2 form than a form 1099-NEC.