I am hoping someone can clarify whether the income reported on a 1099-NEC would be eligible for the QBI deduction (Turbo Tax calculates the amount, but is leaving it up to me to determine if the income meets the criteria to be considered QBI in the first place, which seems odd). My husband works as an independent contractor in a field that it is very common to work in that capacity rather than as a direct employee. He does not own/operate a business/legal entity, but he receives 1099-NECs from a company that contracts with independent contractors, but he, of course, is not their employee (no W2 or tax withholdings). When entered, Turbo Tax has always recorded the 1099-NECs he has received in the past as business income (on a Schedule C).
When initially attempting to determine whether the income reported on the 1099 would qualify as QBI, it seemed pretty straightforward, as the income he receives is for actual work performed, so it seemed like it would be considered something akin to wages and would NOT qualify; however, in diving a little deeper, the descriptions provided made it seem that the eligibility related to wages hinges on whether he was an employee with the company (that issued the 1099) within the past three years, which he was not, so it actually seems to pass that test. There are several other factors that are to be considered: (1) the activity must be US based, it passes that test. (2) He must be performing the work with the intent of making a profit and it must be on a regular and continuous basis. He does, and it is, so it passes those tests. Where I become uncertain is the wording that it must be a "qualified trade or business." Again, he does not operate a business/legal entity per se, he simply works independently rather than as an employee. I have tried to provide as much information as possible, so I am hoping it is enough that one of your tax experts will be able to advise whether it would qualify?
