The Supreme Court ruled that to be in a trade or business, you need to be involved with continuity and regularity and that a sporadic activity does not qualify.

For example, in Batok (T.C. Memo 1992-727), the court ruled that John Batok’s window installation job did not rise to a trade or business level. Mr. Batok’s activity, although engaged in for profit, was neither continuous, so it was considered a one-time job that was not subject to self-employment taxes.

Projects that are sporadic or “one and done” are not subject to self-employment taxes. This can be helpful in situations such as paying your child to help with your business. For example, suppose you pay your college student to help with some administrative work over the summer. In that case, you can avoid having that child on the payroll because it’s a temporary position. Your child would have to pay income taxes, but not self-employment taxes.

If you have questions about self-employment taxes, call C&B for advice at 201.787.6542.