The trade or business of performing services as an employee is not a trade or business for purposes of section 199A. Wages reported in box 1 of Form W-2, other than amounts reported in box 1 where the “Statutory Employee”* box (box 13) is checked, are not QBI. If the taxpayer was previously an employee of a business and continues to provide significantly the same services to the business; however, is no longer treated as an employee, there is a presumption that the taxpayer is providing services as an employee for purposes of section 199A. The presumption will include a 3-year period after the taxpayer ceases to be an employee. The taxpayer may argue this assumption if he receives a notice from the IRS. The taxpayer will need to provide records such as contracts or partnership agreements that substantiates his status as a non-employee.
* Statutory Employee
An individual who is not an employee and who is not self-employed. The individual falls into one of the following categories:
A full-time outside salesperson
An agent or commissioned driver
A full-time life insurance salesperson
An individual who works at home with materials or goods and specifications provided by the employer
The employer is responsible for withholding Social Security and Medicare taxes if the individual performs services on a continuing basis, the individual performs the services personally, or the individual has no investment in equipment or property used in the course of business.