I would like to know if I can claim the QBI deduction? I have read multiple other posts and at least some of the IRS documentation, but it still doesn't seem clear.
I retired from an information technology company in July of 2021.
I now have some income from an LLC where I perform software implementation for a variety of customers.
I am contracted for each project through WorkMarket, who provides me with a 1099-NEC each year.
So far, all of my clients have been projects for which I have acted as a subcontractor for my former employer.
My wife and I file jointly and our combined income is much less than the $170,000 limit.
Can I legitimately answer "no" to the TurboTax question as to whether this work was "for my former employer"? Obviously, I want the deduction, but only if it's appropriate.
Thanks!
You'll need to sign in or create an account to connect with an expert.
here is the tax law regarding former employees for purposes of the QBI
REG 1.199A-5(d)(3)
(i)Presumption. Solely for purposes of section 199A(d)(1)(B) and paragraph (d)(1) of this section, an individual that was properly treated as an employee for Federal employment tax purposes by the person to which he or she provided services and who is subsequently treated as other than an employee by such person with regard to the provision of substantially the same services directly or indirectly to the person (or a related person), is presumed, for three years after ceasing to be treated as an employee for Federal employment tax purposes, to be in the trade or business of performing services as an employee with regard to such services. As provided in paragraph (d)(3)(ii) of this section, this presumption may be rebutted upon a showing by the individual that, under Federal tax law, regulations, and principles (including common-law employee classification rules), the individual is performing services in a capacity other than as an employee. This presumption applies regardless of whether the individual provides services directly or indirectly through an entity or entities.
(ii) Rebuttal of presumption. Upon notice from the IRS, an individual rebuts the presumption in paragraph (d)(3)(i) of this section by providing records, such as contracts or partnership agreements, that provide sufficient evidence to corroborate the individual's status as a non-employee. Presumption. Solely for purposes of section 199A(d)(1)(B) and paragraph (d)(1) of this section, an individual that was properly treated as an employee for Federal employment tax purposes by the person to which he or she provided services and who is subsequently treated as other than an employee by such person with regard to the provision of substantially the same services directly or indirectly to the person (or a related person), is presumed, for three years after ceasing to be treated as an employee for Federal employment tax purposes, to be in the trade or business of performing services as an employee with regard to such services. As provided in paragraph (d)(3)(ii) of this section, this presumption may be rebutted upon a showing by the individual that, under Federal tax law, regulations, and principles (including common-law employee classification rules), the individual is performing services in a capacity other than as an employee. This presumption applies regardless of whether the individual provides services directly or indirectly through an entity or entities.
(ii) Rebuttal of presumption. Upon notice from the IRS, an individual rebuts the presumption in paragraph (d)(3)(i) of this section by providing records, such as contracts or partnership agreements, that provide sufficient evidence to corroborate the individual's status as a non-employee.
*****************************;
You may have to rebut this presumption upon notice from the IRS by providing records such as contracts or partnership agreements that corroborate your status as a non-employee. For more information on whether you are an employee or an independent contractor, see Pub. 15-A, Employer’s Supplemental Tax Guide, and Pub. 1779, Independent Contractor or Employee.
*******************************************
you can also prepare IRS form SS-8 for your own use to determine if you are an employee or an independent contractor. by answering the questions you should be able to get an idea of how the iRS would rule. you can submit this form to the IRS to make the determination for you but don't expect a quick response.
https://www.irs.gov/pub/irs-pdf/fss8.pdf . in short there is no one factor that makes you an independent contractor vs an employee
here is the tax law regarding former employees for purposes of the QBI
REG 1.199A-5(d)(3)
(i)Presumption. Solely for purposes of section 199A(d)(1)(B) and paragraph (d)(1) of this section, an individual that was properly treated as an employee for Federal employment tax purposes by the person to which he or she provided services and who is subsequently treated as other than an employee by such person with regard to the provision of substantially the same services directly or indirectly to the person (or a related person), is presumed, for three years after ceasing to be treated as an employee for Federal employment tax purposes, to be in the trade or business of performing services as an employee with regard to such services. As provided in paragraph (d)(3)(ii) of this section, this presumption may be rebutted upon a showing by the individual that, under Federal tax law, regulations, and principles (including common-law employee classification rules), the individual is performing services in a capacity other than as an employee. This presumption applies regardless of whether the individual provides services directly or indirectly through an entity or entities.
(ii) Rebuttal of presumption. Upon notice from the IRS, an individual rebuts the presumption in paragraph (d)(3)(i) of this section by providing records, such as contracts or partnership agreements, that provide sufficient evidence to corroborate the individual's status as a non-employee. Presumption. Solely for purposes of section 199A(d)(1)(B) and paragraph (d)(1) of this section, an individual that was properly treated as an employee for Federal employment tax purposes by the person to which he or she provided services and who is subsequently treated as other than an employee by such person with regard to the provision of substantially the same services directly or indirectly to the person (or a related person), is presumed, for three years after ceasing to be treated as an employee for Federal employment tax purposes, to be in the trade or business of performing services as an employee with regard to such services. As provided in paragraph (d)(3)(ii) of this section, this presumption may be rebutted upon a showing by the individual that, under Federal tax law, regulations, and principles (including common-law employee classification rules), the individual is performing services in a capacity other than as an employee. This presumption applies regardless of whether the individual provides services directly or indirectly through an entity or entities.
(ii) Rebuttal of presumption. Upon notice from the IRS, an individual rebuts the presumption in paragraph (d)(3)(i) of this section by providing records, such as contracts or partnership agreements, that provide sufficient evidence to corroborate the individual's status as a non-employee.
*****************************;
You may have to rebut this presumption upon notice from the IRS by providing records such as contracts or partnership agreements that corroborate your status as a non-employee. For more information on whether you are an employee or an independent contractor, see Pub. 15-A, Employer’s Supplemental Tax Guide, and Pub. 1779, Independent Contractor or Employee.
*******************************************
you can also prepare IRS form SS-8 for your own use to determine if you are an employee or an independent contractor. by answering the questions you should be able to get an idea of how the iRS would rule. you can submit this form to the IRS to make the determination for you but don't expect a quick response.
https://www.irs.gov/pub/irs-pdf/fss8.pdf . in short there is no one factor that makes you an independent contractor vs an employee
Thanks! And great answer! Now it looks like I have some additional reading to do.
Still have questions?
Questions are answered within a few hours on average.
Post a Question*Must create login to post
Ask questions and learn more about your taxes and finances.
Fufwat-nehxow-cegqa7
New Member
TLLau
Returning Member
susan korthase
Level 2
fatimatiwana
New Member
francisbrewster54
New Member