I'm a bank director receiving a 1099 and self-employed organist for weddings and funerals. I read that being a musician is not a Qualified Business. Is either one a QIB?

[Stacie17]

I am also a paid organist for a church receiving a W-2, but the wedding/funeral organist business is not connected at all to any church. I'm asking strictly about the service on the board of directors for a local bank for which I've received a 1099 and the self-employed/independent contractor income I've always reported on a Schedule C as a wedding/funeral organist.

[Vanessa · Accepted solution]

No, neither one is QBI. You are correct when you said musicians are not a qualified business as they are a performing art.  Financial services, investing and investment management are also excluded from taking the QBI.  

Per the IRS

"A5. A qualified trade or business is any trade or business, with two exceptions:

1. Specified service trade or business (SSTB), which includes a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees. This exception only applies if a taxpayer’s taxable income exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers
    
2. Performing services as an employee"

https://www.irs.gov/newsroom/tax-cuts-and-jobs-act-provision-11011-section-199a-qualified-business-i...

[Stacie17]

Vanessa, thanks for the prompt reply, but here's the reason for the confusion. I had reported those two businesses as QIB while awaiting a reply. Just now when I reversed that, TTH/B gives this message: "OK, since this business was operated outside the United States, or this business was entirely income from a previous employer for work that was the same as what you did as an employee, we won't include this business when calculating the QBI deduction." Neither of those conditions is true. Is that message a TT error? That statement is why I was confused in the first place. Just trying to verify. Also, the amount of the bank director fee does not show up as "Income  from Form 1099-MISC" like it did last year. That's a TT problem caused by my first listing them as QIBs that was not changed when I reversed that, right?

[Vanessa]

No, it is not a TT Error, it is a generic message.  If you notice, when it asks "Is this Qualified Business Income"  It says Most business income is qualified business income if it meets both of these conditions, then it's qualified.  "The business is operated in the US and the income is not treated as wages by the IRS."  Then there is a hyper link for More Info about what's considered a qualified business.

When it's telling you you don't qualify, it is just generically repeating the portion of the question it asked. I can see where that would be confusing.

[Stacie17]

What about the fact that TT is not showing the Bank Director 1099 income on the "Your 2018 Income Summary" the way that it did last year under "Other Common Income" (1099 MISC) but, fortunately, does show it under "Here's a Picture of Your 2018 Income"? Shouldn't it be under both? Let question, I promise.

[Vanessa]

Without seeing it, I can't tell you for sure, but if you are using home and business it is possibly listed under the business income section.

[LetMeCheck]

Unfortunately I think your previous advice is incorrect. Both sources of income might qualify as Qualified Business Income - QBI.  The confusion results from the rule for a Specified Service Trade or Business - SSTB.  For an SSTB there can be restrictions based on your income level ($157,000 for Single, $315,000 for Married).   Performing Arts and Financial Services are two categories that are SSTB.  I don't think being a bank director is performing Financial Services, but being a musician likely is.  But if your income is below the threshold, the SSTB test doesn't matter.  You likely can amend your return to claim the QBI deduction. Please see a qualified tax adviser.

[njcpa]

Bank director is consulting or very similar as the value delivered in exchange for fees is that of the person’s judgement, experience, expertise and influence in the industry.