Client works as an independent insurance agent out of his home office. He receives form 1099 from the various companies’ he represents and files Schedule C and Form 8829. He has slowed down over the last few years and sold no new policies last year. He receives and will receive 1099 forms as long as he has renewals. Since these are reported as nonemployee compensation he will be expected to pay self employment tax. Question is can he continue to maintain his home office as a deduction as long as he stores client files and is available to them? I’m thinking not since he is no longer regularly and continuously involved in the business of selling but I’d be interested in the opinions of others on the board.
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In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville -
If he is still servicing his clients, then yes. Or has his book been turned over to a new agent, then no.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content. -
some cases
A LONG time ago, State Farm "retired" agents got a "ruling"?? won a court case?? so that those payments were considered "retirement" and were NOT required to pay SE tax on them. (sorry no cite but I'm sure that my memory is not toally gone on this issue)...Comment
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Jackson v. Commissioner, 108 T.C. 130 (1997)
That case is regarding termination payments which ae based on a commission structure and are paid for 3 or 5 years. These are renewal payments and cease only if the policy generating the income is cancelled or terminates. In Milligan v.
Commissioner, 38 F.3d 1094 (9th Cir. 1994) they found that renewal payments are subject to SE tax.
I'm just pondering if the use of his home as storage for his business records would rise to the level of a trade or business to allow him to offset some of the income and SE tax with the 8829.In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de TocquevilleComment
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These are usually commissions on prior sales could be Ln 21 not subject to SEBelieve nothing you have not personally researched and verified.Comment
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See the instructions for 1099-MISC reporting, page 4, Box 3 - Other Income -- regarding terminated, self-employed insurance agents. If he meets all these requirements, the payments are not subject to SE tax, and should be reported in Box 3.Comment
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