199A for a dependent???

[Hahn1040]

has anyone come across this yet:

college kid; has 1099MISC for $1,300 for coaching LAX; no expenses

he does have taxable income

I tried looking, but I don't see anything that addresses this.  ...seems to me that with the number of deductions and credits that are not allowed for dependents, this would be one of them!

[EricF]

There's nothing in the law that limits the availability of Sec 199A to taxpayers who are not dependents.  Be aware, though, that there is also a limit on the deduction to 20% of taxable income.  After the dependent deducts his standard deduction, there may be little taxable income left on which to compute a 20% deduction.

[TAXMAN]

I too have a very similar situation. My dependent does have some taxable income left over. So do I give tp the Sec199 deduction. Won't be much.

[EricF]

Yes, enter the QBI deduction, likely the amount from the 1099 less any self-employment tax deduction, in the Sec 199A worksheet. But I can't figure out how to add "other income" to the activities list.  ATX only lists the activities coming form Schedule C, Schedule E, Schedule F, and K-1s.  Does that mean that we have to have a Schedule C for ATX to compute QBI?

[BulldogTom]

23 minutes ago, EricF said:

But I can't figure out how to add "other income" to the activities list.  ATX only lists the activities coming form Schedule C, Schedule E, Schedule F, and K-1s.  Does that mean that we have to have a Schedule C for ATX to compute QBI?

I think that is the case.   The deduction is for Qualified Business Income from a passthrough entity (or a real estate rental activity).   Other income would not meet that definition.   But that is my common sense take on a nonsensical law, so I may be very mistaken.

Tom
Modesto, CA

[EricF]

1 hour ago, BulldogTom said:

The deduction is for Qualified Business Income from a passthrough entity (or a real estate rental activity).   Other income would not meet that definition.   But that is my common sense take on a nonsensical law, so I may be very mistaken.

Sole proprietors qualify for QBI as well.  The person receive nonemployee compensation on a 1099-MISC should qualify too.  I have normally reported such income with no related expenses as "other income" to avoid Schedule C, since Schedule C taxpayer have a slightly higher audit rate.  Schedule C reporting may be the cost of trying to obtain QBI treatment for nonemployee compensation.

[BulldogTom]

Sole proprietor is kinda like a pass through entity.   My tax practice has its own EIN, but reports on my 1040.   Kinda like a passthrough entity.  

Tom
Modesto, CA

[RitaB]

1 hour ago, EricF said:

I have normally reported such income with no related expenses as "other income" to avoid Schedule C, since Schedule C taxpayer have a slightly higher audit rate.  Schedule C reporting may be the cost of trying to obtain QBI treatment for nonemployee compensation.

You are no doubt completing Sch SE for these self-employed folks whose income you entered on Line 21, right?  At first I thought, "Well, that is going from the frying pan to the fire," but then I was ok.  I'm posting anyway because people are leaving me alone and I don't want to work.

[EricF]

 

4 minutes ago, RitaB said:

You are no doubt completing Sch SE for these self-employed folks whose income you entered on Line 21, right? 

Yes, you can code a Box 7, 1099-MISC to, among others, Schedule C, Other Income (no SE tax), and Other Income (SE tax).  For nonemployee compensation without a Schedule C, I use Other Income (SE tax) and it goes to Sch SE as well as Line 21.

[TAXMAN]

Does reporting it on line 21 as stated does that kill the Sec199? ATX looks for a sch c to see the Sec199.

[EricF]

16 hours ago, TAXMAN said:

Does reporting it on line 21 as stated does that kill the Sec199? ATX looks for a sch c to see the Sec199.

I don't think it kills Sec 199A per the law, but ATX doesn't list it as an activity on the Sec 199A Worksheet and therefore no QBI.  In ATX, it's looking like you have to create a Sch C.

[Abby Normal]

Line 21 income with SE tax is a shortcut that I have used in distant past for ICs that have no expenses, to save from adding a Sch C, but I just add the Sch C now. If it's going to be ongoing, I will at least allocate some tax prep to Sch C the following year.

[DANRVAN]

Does this activity rise to the level of a trade or business under sect 162?  Also advice the kid not to go over the threshold for SSTB exclusion!

[Hahn1040]

exactly!  We all know that this college kid is seriously in the business of coaching:

Head coach: do you want to coach these little kids... I'll give you 50 buck

college kid: OK  (do I have to get up before 11 am to do it?)

and certainly it is a SSTB:  endorsements, personal appearances all of that

[TAXMAN]

Looking at the above notes, I too wonder if this will give rise to the level of a business simply because it was listed on a 1099 or put on  Sch c because that will be where IRS will be looking for that number?