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Does the QBI deduction matter if my income was from a previous Employer? When I mark "All of my income was for a previous Employer", it increases my amount owed by $3K.
When I check the box "all of my income was for a previous Employer", it increases my Federal tax owed by about $3K. Why is this?
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Does the QBI deduction matter if my income was from a previous Employer? When I mark "All of my income was for a previous Employer", it increases my amount owed by $3K.
Yes, it matters. One of the rules for taking the QBI is that it cannot be earned as an employee and cannot be received from as an independent contractor for someone who was your employer in the past 3 years.
There is one exception to that. If you can prove that you were performing services for that employer in a capacity other than as an employee, then you can take the QBI.
"Specifically, proposed §1.199A-5(d)(3) provides that, solely for purposes of section 199A(d)(1)(B) and the regulations thereunder, an individual who was treated as an employee for Federal employment tax purposes by the person to whom 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 to be in the trade or business of performing services as an employee with regard to such services. This presumption may be rebutted only upon a showing by the individual that, under Federal tax rules, 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. This presumption is solely for purposes of section 199A and does not otherwise change the employment tax classification of the individual. Section 199A is in subtitle A of the Code, and this rule does not apply for purposes of any other subtitle, including subtitle C. Accordingly, this rule does not - 74 - implicate section 530(b) of the Revenue Act of 1978" https://www.irs.gov/pub/irs-drop/reg-107892-18.pdf
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Does the QBI deduction matter if my income was from a previous Employer? When I mark "All of my income was for a previous Employer", it increases my amount owed by $3K.
Yes, it matters. One of the rules for taking the QBI is that it cannot be earned as an employee and cannot be received from as an independent contractor for someone who was your employer in the past 3 years.
There is one exception to that. If you can prove that you were performing services for that employer in a capacity other than as an employee, then you can take the QBI.
"Specifically, proposed §1.199A-5(d)(3) provides that, solely for purposes of section 199A(d)(1)(B) and the regulations thereunder, an individual who was treated as an employee for Federal employment tax purposes by the person to whom 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 to be in the trade or business of performing services as an employee with regard to such services. This presumption may be rebutted only upon a showing by the individual that, under Federal tax rules, 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. This presumption is solely for purposes of section 199A and does not otherwise change the employment tax classification of the individual. Section 199A is in subtitle A of the Code, and this rule does not apply for purposes of any other subtitle, including subtitle C. Accordingly, this rule does not - 74 - implicate section 530(b) of the Revenue Act of 1978" https://www.irs.gov/pub/irs-drop/reg-107892-18.pdf
**Mark the post that answers your question by clicking on "Mark as Best Answer"
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