Is anyone familiar with Notarial act exemption and how to claim it on Sched SE? What if that number is larger than your net profit?

[ToddL · Accepted solution]

Notaries must report Notary fees as ordinary income, but Notary fees are not subject to Self-Employment Tax and are usually declared on IRS Form SE. 

You can find more information on this topic in Chapter 12 of the IRS Publication 17 (listed as “Notary Public” beneath the “Other Income” category.)

Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). These payments aren’t subject to self-employment tax. 

From Instructions Schedule SE (Form 1040): Fees received for services performed as a notary public. If you had no other income subject to SE tax, enter “Exempt—Notary” on Form 1040, line 57. Don’t file Schedule SE (see "My Workaround", below). However, if you had other earnings of $400 or more subject to SE tax, enter “Exempt—Notary” and the amount of your net profit as a notary public from Schedule C or Schedule C-EZ on the dotted line to the left of Schedule SE, line 3. Subtract that amount from the total of lines 1a, 1b, and 2, and enter the result on line 3.

(Since these are manual entries, you should use a desktop (CD/Download) of TurboTax. This will give you the ability to make direct entries to the tax form. Depending on your particular situation (other SE income?), you may have to print and file by mail, after making necessary adjustments and corrections. As far as "net losses", you could still report your expenses on a Schedule C).

"My Workaround", probably good for any of the above situations:

Report your non-Notary fee income, if any, and ALL expenses on a Schedule C. 

Enter your Notary Fee income as follows:

• Go to Less Common Income, Miscellaneous Income and Other reportable income (enter "other reportable income" in the Search Box and Select "Jump to other reportable income")
• Continue to the screen "Other Taxable Income". Enter the description as "Notary Fee Income" and the amount. These are NOT wages.

[notary22]

Thank you! 1 followup question please. If when I enter my notarial act amount and do the math as directed and the number becomes a negative amount do I enter the negative amount or $0?

[ToddL]

This is a tad tricky to explain, but here  goes: Create a Schedule C with all your expenses and any NON-Notary income you might have. If none, then the Schedule C will show a loss. If the expenses are "ordinary and necessary" for your notary income,  you can claim that loss. You Notary Fee Income is entered in the "Other Taxable Income" interview, no expenses considered. Does that help?

[notary22]

All of my income last year is from Notary Services and I have a positive income on Schedule C after all "ordinary and necessary" expenses (including auto, home office, supplies, insurance, medical, etc.)  but my Notarial Act fees (approximately 63% of my income) amount to more than my adjusted income....and my understanding is the "Notary Exempt $xx,xxx" verbiage and math goes on the Schedule SE, line 3 which will make that a negative number...anything less than $400 owes no SE Tax which will transfer a $0 to my 1040 line 57, so I think I understand now....hopefully.
Thank you so much for all of your help Todd! I have talked to may 'experts,' had 2 accountants who said they knew about the Notarial Act Exemption and made numerous frustrating calls to the IRS in past years and all I've received is shoulder shrugs, "whaaat's???" and incorrect filings. I'm downloading TT and will do it myself. They can only tell me its wrong and maybe then I can get someone who knows what they are doing to help me!

[debra-castor]

Does my income as a mobile notary qualify under this since I am receie a 1099-NEC from the signing service that I work through?

[BillM223]

Yes.

Your description suggests that you are still self-employed, only you are being paid by a signing service as a contractor rather than directly by the customer.

But you are performing the same function, right?

But you would file Schedule C in either case and still be able to exempt some Schedule SE taxes.

[JonO958]

Question in response to Bill M - when entering the notary income in the "Other Taxable income" area, are the 1099-NEC's received entered individually, or is all of the income rolled up into a lump sum?  My wife has several 1099-NEC's and numerous other fees received that did not require a 1099.

Thanks!

[KathrynG3]

It is your choice. Since the IRS also receives a copy of official forms such as Form 1099-NEC, then it is common to enter those individually, and enter the remainder of the income as a lump sum. However, the primary requirement is that all income earned for the business be included, regardless of how it was received.

For more information, see: How to File Taxes with IRS Form 1099-NEC - TurboTax Tax Tips & Videos.

@JonO958

[notarystacey]

Hi there,

I'm a self employed mobile notary. For example a signing service will pay me $100 to complete a loan signing. Generally I perform 5-7 notarial certificates per loan signing. I'm in CA so I can charge up to $15 per notarial act. In 2021, I performed 412 notarial acts, so that equals: $6180. 

I made a total of $4190 from 1099s in 2021 from signing services. Do I enter that total amount as reportable income, put in my expenses on the schedule C, then list the $6180 as miscellaneous income? Or do I deduct the $6180 from the $4190 and put in a negative earning of -$1990 on the Schedule C and enter all of my expenses?

Thanks so much. 

[DMarkM1]

You need to separate out the fees for "notarial acts" versus fees for the other forms in a loan signing and enter them in the applicable lines as noted earlier by @ToddL above. 

Ultimately, you will enter any/all non-notary fees received on Schedule C in the "Self-employment" topic and enter any expenses there as well.

You will only enter fees received for Notary services in the "Other Reportable" income line.
 

So for example you received $10,000 total notary acts and loan signings.  That total is divided into three categories. 

1.  Notarial acts - non-signing agent 

2.  Notarial Acts - signing agent 

3.  Loan signing agent non-notarial forms.

The total of categories 1 and 2 are entered in the "Other reportable income" topic as "Notary Fees"

The total of category 3 is entered in the "Self-employment" topic along with any expenses.  

[notarystacey]

Hi!

Thanks so much for your answer.

I'm probably over complicating this, but I have virtually no "Loan Signing Agent NON-notarial forms" as I can't see a way to cost those out of the entire document package. With almost every loan signing, the amount of notarial acts preformed at $15 per certificate exceed what my overall compensation is for that signing is. 

I average $100 per signing. I generally have 5-10 certificates, often times 2 signers, so that can be 10-20 notarial acts per signing. 

So for your example, I do not have anything for line ( 1.) All of my work has been through signing agencies for loan packets.

2. This is where I see all of my notarial acts coming from (signing agent work)

3. I do have the majority of documents signed that are NON notarial forms in a document packet, but don't understand how I would cost this out. 

Right now I have all of my income on the schedule C for loan signing compensation from signing agencies per ex. ($3000)  I have also included all of my expenses (mileage, paper, toner, pens, journals, stamps, classes, etc.)

Then I added up all of the notorial fees from all of the signings I did (412 total) ($6180), and added those under "Other Reportable Income." This brought my overall refund up a lot which I'm concerned I didn't enter this in correct. 

I appreciate you helping me in such detail on this!

[cesar-amendes90]

Hi, I have the same question, but first, the proposed solution can be applied in the TTX SE online? It seems to me that the solution is better applied to IRS forms and there are different ways to do this in different TTX products, such as online vs desktop (which one I don't have any contact with). I think some difficulties are in where to put this information on TTX.

[cesar-amendes90]

Some more information... This is my first time doing tax as a public notary and I'm trying to do this in TurboTax Self-employed Online. TTX SE online is the right option for this?

[Vanessa A]

Yes, TurboTax Self-employed will guide you through filling out a Schedule C for your public notary income.