Notary and QBI deduction

[khedges]

Hello,

Has there been any concrete guidance published on whether notary income is considered a "a business" for purposes of the QBI deduction.  (As public service work is not considered "a business" subject to SE tax).  

[BobKamman]

No, you can still ask three tax preparers and get four different answers.  The people who write the Regulations have bigger questions to ponder, even when California notaries can collect $15 per stamp.

[rbynaker]

Unicorns might exist, but I've never seen one.  Certainly nothing that rises to the level of a trade or business.  Are you saying you have a client with a thriving notary business that pays the mortgage and puts food on the table?

[BobKamman]

https://www.vice.com/en_us/article/d3k83a/my-failed-quest-to-get-rich-by-being-a-notary-public

[khedges]

They own a bunch of UPS stores and have well over $150k of notary income.  

[rbynaker]

Can you explain how the money flows?

If I walk into a UPS store and pay the store $10 to have a document notarized, I'm pretty sure that's just regular income to the store.  If, instead, I pay the individual at the desk (who is also a notary) $10 personally for notary services, then that particular individual may fall under the SE exception as a fee-based official (but they need to keep detailed records segregating notary income from other income).  Unless your client with "a bunch of UPS stores" is the one doing the notarizing, I think it's just going to be trade or business income.

Just my $0.02 worth.

[khedges]

The employees do the notary services.  The services are rung up as notary service income.  There is POS for all UPS stores so the income goes to a separate GL account, but as a bulk journal for the day.

[jenhorton]

I found the answer - Notary Services are not eligible for QBI.

Refer to this section of the law:  Treasury Regulations/Subchapter A/Part 1/Section 1.1402(c)-2:

"... the performance of the functions of a public office does not constitute a trade or business."

Section 2 offers an exception; however, the two last sentences in Section 1.1402(c)-2-(a)(2)(ii)(B)(b) describing the exception state the answer clearly:

"(However, the service of a notary public could not be made the subject of a section 218 agreement under the Social Security Act because notaries are not "employees" within the meaning of that section.  Accordingly, such service does not constitute a trade or business.)"

Notary Publics are not eligible for the QBI deduction.  IMHO