Independent Contractor

[terimac4]

I work for a company that pays me a monthly salary as an independent contractor. I understand that I am considered to be self-employed. My question is do I "materially participate". I have been reading info about it, but I am still not sure, as all requirements do not apply to me. This is my second year of working part time. Do I choose Yes or No?

Thank you!

[KLP56]

If you are working for an hourly rate, or for a "salary," you ARE materially participating.  This is distinguished from investment-type income. 

[terimac4]

Thank you! That is what I thought, but I wasn't sure. Appreciate your time!

[AnnetteB6]

One of the material participation tests is that 'Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who didn’t own any interest in the activity.'

Even though there are several tests for material participation, you only have to meet one of those tests to qualify.  When you consider that the question pertains to your personal Schedule C business as an independent contractor, then you would clearly qualify as materially participating in your Schedule C business because you are the one doing the work as the independent contractor.  Unless you are not the one performing the work, then you can answer that yes, you materially participated.

@terimac4 

[terimac4]

Thank you!

 Do I also qualify for the business income (QBI) ? I believe I do.  

[ThomasM125]

Yes, your income would be considered qualified business income since you materially participate in a non-passive business activity. That may entitle you to a tax deduciton on your federal tax return in an amount up to 20% of your business income.