Thursday, February 23, 2006
No Self-Employment Tax on Notary Income
The work of notaries public is in demand with all so many people buying or refinancing their homes. A notary must attest to many signatures in the closing of a purchase or refinancing of real estate. A notary public serves as a state official who is a bonded witness of a signature. In Florida and perhaps in other states, a notary public can also perform a marriage.
While the net income of a notary public is subject to federal income tax, it is not subject to self-employment tax. Section 1402(c)(1) of the Internal Revenue Code and Regulations Section 1.1402(c)-2(b) provide that the income of a notary public is not subject to self-employment tax.
If a notary public has another business as a self-employed individual, the notary public must pay self-employment tax on the net income from the other business. The notary public must keep a separate account of the income and expenses of each separate business.
A self-employed notary public reports the income and expenses from serving as a notary public on Schedule C of Form 1040. However, the net income from serving as a notary public does not go on Schedule SE because the net income from serving as a notary public is exempt from the self-employment tax.
If the taxpayer has erroneously paid self-employment tax on the net income from serving as a notary public in previous years, the taxpayer should consider filing an amended return on Form 1040X to claim a refund for all open years. In general, a taxpayer has two years from the time the taxpayer paid the tax or three years from the date the taxpayer filed the return, whichever is later, to claim a refund. Taxpayers should consult a competent tax professional before filing an amended return.
While the net income of a notary public is subject to federal income tax, it is not subject to self-employment tax. Section 1402(c)(1) of the Internal Revenue Code and Regulations Section 1.1402(c)-2(b) provide that the income of a notary public is not subject to self-employment tax.
If a notary public has another business as a self-employed individual, the notary public must pay self-employment tax on the net income from the other business. The notary public must keep a separate account of the income and expenses of each separate business.
A self-employed notary public reports the income and expenses from serving as a notary public on Schedule C of Form 1040. However, the net income from serving as a notary public does not go on Schedule SE because the net income from serving as a notary public is exempt from the self-employment tax.
If the taxpayer has erroneously paid self-employment tax on the net income from serving as a notary public in previous years, the taxpayer should consider filing an amended return on Form 1040X to claim a refund for all open years. In general, a taxpayer has two years from the time the taxpayer paid the tax or three years from the date the taxpayer filed the return, whichever is later, to claim a refund. Taxpayers should consult a competent tax professional before filing an amended return.
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i work in an attorney closing state and perform witness only closings in the capacity of an attorney and a notary. I do not not provide any legal advise or legal work in connection with the closings, only sign and notarize. However, I am required to be any attorney. My question is can I treat that fee as notary income exempt from SE tax
# posted by 
: 8:24 PM
: 8:24 PM
Thanks for your question. It is an interesting one.
I researched the issue, and I could not find any authority directly on point on it. The most relevant authority I found was that court reporters who, as a practical matter, were required to be notaries were subject to self-employment tax on earnings from operating a court reporting business. See Allen C. Moore and Annette Moore v. U. S., 84-1 USTC Para. 9510 (DC Calif., 1984); Kathy Mae Ekren v. Commissioner, TC Memo 1985-1959, 52 TCM 776 (1986); and Rev. Rul. 58-360, 1958-2 CB 423.
Your case seems to be the opposite. You seem to be performing the functions of a notary even though you also have to be an attorney. You certainly have a good argument for excluding your notary income from the calculation of your self-employment tax if all you do is perform the functions of a notary public. However, because there is no clear authority based on such specific facts, the IRS might see the case differently.
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I researched the issue, and I could not find any authority directly on point on it. The most relevant authority I found was that court reporters who, as a practical matter, were required to be notaries were subject to self-employment tax on earnings from operating a court reporting business. See Allen C. Moore and Annette Moore v. U. S., 84-1 USTC Para. 9510 (DC Calif., 1984); Kathy Mae Ekren v. Commissioner, TC Memo 1985-1959, 52 TCM 776 (1986); and Rev. Rul. 58-360, 1958-2 CB 423.
Your case seems to be the opposite. You seem to be performing the functions of a notary even though you also have to be an attorney. You certainly have a good argument for excluding your notary income from the calculation of your self-employment tax if all you do is perform the functions of a notary public. However, because there is no clear authority based on such specific facts, the IRS might see the case differently.
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