Hello!
I am an independent contractor/self-employed, doing work for a company that I do not own. I get paid for the work I do and don't really have any business expenses. I have input all my 1099-NEC info into TurboTax, which is the only thing I get from this company. TurboTax is saying I need to do something with a Schedule C and asking if I have QBI income. Yes, no, no entry are the choices; but it gives me no other information on what this means. I don't know where to look to find out what to choose. Do I click yes just because I'm self-employed? But shouldn't that be covered by the 1099-NEC already? Or is it "no entry" because I didn't get any paperwork on it?
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the term trade or business for purposes of the QBI deduction is not specifically defined other than meaning "a Section 162 trade or business" [Reg 1.199A-1(b)(14)]. Unfortunately, IRC Sec 162 does not define a trade or business either. Instead, SCOTUS's decision in Groetzinger [59 AFTR 2d 87-532 (S. Ct. 1987) is looked to for a definition. The Court stated: ... Not every income-producing and profit-making endeavor constitutes a trade or business .... We accept the fact that to be engaged in a trade or business, the taxpayer must be involved in the activity with continuity and regularity and that the taxpayer's primary purpose for engaging in the activity must be for profit or income, A sporadic activity, a hobby, or an amusement diversion does not qualify.
for the above reason, Turbotax leaves it to the taxpayer to determine if they are engaged in a qualified trade or business.
if you are, there is a special computation if you are engaged in a specified service trade or business. REG 1.199A-5
https://www.law.cornell.edu/cfr/text/26/1.199A-5
would it surprise you to know that code section 199A is about 1 page of a typical book, but it took the IRS over 200 pages for an initial explanation with subsequent announcements to clarify various provisions
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