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taxmap/pubs/p334-016.htm#TXMP65038002 Guidelines for Selected Occupations

Self-Employment Tax

This section provides information to determine whether your earnings should be reported on Schedule C (Form 1040) or C-EZ (Form 1040).

taxmap/pubs/p334-016.htm#TXMP56ef97ef Direct seller.

You must report all income you receive as a direct seller on Schedule C or C-EZ. This includes any of the following.

• Income from sales—payments you receive from customers for products they buy from you.
• Commissions, bonuses, or percentages you receive for sales and the sales of others who work under you.
• Prizes, awards, and gifts you receive from your selling business.

You must report this income regardless of whether it is reported to you on an information return.

You are a direct seller if you meet all the following conditions.

1. You are engaged in one of the following trades or businesses.
   1. Selling or soliciting the sale of consumer products either in a home or other place that is not a permanent retail establishment, or to any buyer on a buy-sell basis or a deposit-commission basis for resale in a home or other place of business that is not a permanent retail establishment.
   2. Delivering or distributing newspapers or shopping news (including any services directly related to that trade or business).
2. Substantially all your pay (whether paid in cash or not) for services described above is directly related to sales or other output (including performance of services) rather than to the number of hours worked.
3. Your services are performed under a written contract between you and the person for whom you perform the services, and the contract provides that you will not be treated as an employee for federal tax purposes.

taxmap/pubs/p334-016.htm#TXMP3914e9c4 Executor or administrator.

If you administer a deceased person's estate, your fees are reported on Schedule C or C-EZ if you are one of the following:

1. A professional fiduciary.
2. A nonprofessional fiduciary (personal representative) and both of the following apply.
   1. The estate includes an active trade or business in which you actively participate.
   2. Your fees are related to the operation of that trade or business.
3. A nonprofessional fiduciary of a single estate that requires extensive managerial activities on your part for a long period of time, provided these activities are enough to be considered a trade or business.

If the fees do not meet the above requirements, report them on line 21 of Form 1040.

taxmap/pubs/p334-016.htm#TXMP0b3b49b8 Fishing crew member.

If you are a member of the crew that catches fish or other water life, your earnings are reported on Schedule C or C-EZ if you meet all the requirements shown in chapter 10 under Fishing crew member.

taxmap/pubs/p334-016.htm#TXMP22768a87 Insurance agent, former.

Termination payments you receive as a former self-employed insurance agent from an insurance company because of services you performed for that company are not reported on Schedule C or C-EZ if all the following conditions are met.

• You received payments after your agreement to perform services for the company ended.
• You did not perform any services for the company after your service agreement ended and before the end of the year in which you received the payment.
• You entered into a covenant not to compete against the company for at least a 1-year period beginning on the date your service agreement ended.
• The amount of the payments depended primarily on policies sold by you or credited to your account during the last year of your service agreement or the extent to which those policies remain in force for some period after your service agreement ended, or both.
• The amount of the payment did not depend to any extent on length of service or overall earnings from services performed for the company (regardless of whether eligibility for the payments depended on length of service).

taxmap/pubs/p334-016.htm#TXMP7946054f Insurance agent, retired.

Income paid by an insurance company to a retired self-employed insurance agent based on a percentage of commissions received before retirement is reported on Schedule C or C-EZ. Also, renewal commissions and deferred commissions for sales made before retirement are generally reported on Schedule C or C-EZ.

However, renewal commissions paid to the survivor of an insurance agent are not reported on Schedule C or C-EZ.

taxmap/pubs/p334-016.htm#TXMP5e38c4d2 Newspaper carrier or distributor.

You are a direct seller and your earnings are reported on Schedule C or C-EZ if all the following conditions apply.

• You are in the business of delivering or distributing newspapers or shopping news (including directly related services such as soliciting customers and collecting receipts).
• Substantially all your pay for these services directly relates to your sales or other output rather than to the number of hours you work.
• You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes.

This rule applies whether or not you hire others to help you make deliveries. It also applies whether you buy the papers from the publisher or are paid based on the number of papers you deliver.

taxmap/pubs/p334-016.htm#TXMP7b478a11 Newspaper or magazine vendor.

If you are 18 or older and you sell newspapers or magazines, your earnings are reported on Schedule C or C-EZ if all the following conditions apply.

• You sell newspapers or magazines to ultimate consumers.
• You sell them at a fixed price.
• Your earnings are based on the difference between the sales price and your cost of goods sold.

This rule applies whether or not you are guaranteed a minimum amount of earnings. It also applies whether or not you receive credit for unsold newspapers or magazines you return to your supplier.

taxmap/pubs/p334-016.htm#TXMP097b6b97 Notary public.

Fees you receive for services you perform as a notary public are reported on Schedule C or C-EZ. These payments are not subject to self-employment tax (see the instructions for Schedule SE (Form 1040)).

taxmap/pubs/p334-016.htm#TXMP1fce5817 Public official.

Public officials generally do not report what they earn for serving in public office on Schedule C or C-EZ. This rule applies to payments received by an elected tax collector from state funds on the basis of a fixed percentage of the taxes collected. Public office includes any elective or appointive office of the United States or its possessions, the District of Columbia, a state or its political subdivisions, or a wholly owned instrumentality of any of these.

Public officials of state or local governments report their fees on Schedule C or C-EZ if they are paid solely on a fee basis and if their services are eligible for, but not covered by, social security under a federal-state agreement.

taxmap/pubs/p334-016.htm#TXMP66f85b6b Real estate agent or direct seller.

If you are a licensed real estate agent or a direct seller, your earnings are reported on Schedule C or C-EZ if both the following apply.

• Substantially all your pay for services as a real estate agent or direct seller directly relates to your sales or other output rather than to the number of hours you work.
• You perform the services under a written contract that says you will not be treated as an employee for federal tax purposes.

taxmap/pubs/p334-016.htm#TXMP4f60d734 Securities dealer.

If you are a dealer in options or commodities, your gains and losses from dealing or trading in section 1256 contracts (regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts) or property related to those contracts (such as stock used to hedge options) are reported on Schedule C or C-EZ. For more information, see sections 1256 and 1402(i).

taxmap/pubs/p334-016.htm#TXMP0c26aece Securities trader.

You are a trader in securities if you are engaged in the business of buying and selling securities for your own account. As a trader in securities, your gain or loss from the disposition of securities is not reported on Schedule C or C-EZ. However, see Securities dealer, earlier, for an exception that applies to section 1256 contracts. For more information about securities traders, see Publication 550, Investment Income and Expenses.

Previous Page:  Publication 334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) - Items That Are Not Income Next Page:  Publication 334 - Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) - Accounting for Your Income Use     to find additional instances of index items.