Can someone please explain the different income streams that are considered taxable and the income streams that are not taxable from an IRS perspective?
Wil, most of us are signing agents, not tax accountants 
You would get the most correct answer to this question from a tax advisor who is familiar with your particular tax situation.
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klewis31975, I believe I found my answer here:
https://www.notarypublicstamps.com/articles/notaries-plan-ahead-for-tax-season/
“All notary fees and payments for notary services are reportable as
income, but notary fees are not subject to self-employment taxes.
(Self-employment taxes are the payments a self-employed person pays into
their Social Security and Medicare accounts.”
And yes I agree with your comments above about consulting with a Tax Advisor.
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Wil…that’s correct.
All of your fee is reportable as taxable income - the state-mandated fees you can charge as a notary public (in FL $10//notarization) is exempt from Self-employment tax only. Not sure where you are but if you have a state income tax, you’ll need to check your state regulations about how to handle your notary income on that return.
And yes, a tax advisor or CPA is a good idea if you’re unsure…just be aware that many of them don’t know about the notary exemption. So make sure whoever you use is aware of this.
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LindaH I live in California.
Will, I am an Enrolled Agent, and have been preparing tax returns professionally since 1980. I also am a signing agent and have been doing signings since 1998. All of the net in come from doing notary work is taxable for federal and state income taxes. None of the income is taxable for social security purposes. All of the work we do, rather you notarize or not, is being done because we are Notary’s. Please check out my website at www.katestax.com. You can get my phone number and contact information from there. I do tax returns from all over the country. I have several clients in California. I am in Indiana
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Please see my post to will. I am a tax professional.
When it asks for the work or job code I never know what to choose sin e notary is never listed. What do you choose ? Does it matter. Are these codes connected somehow to make the income exempt from the self employment tax?
I just do not use a special code. I just label the business profession as notary on the Sch C, then on the SE form line 3, I write in “Exempt Notary Income”.
The IRS has questioned me on it in the past, and I just submit the regs and code section that back it up, and they leave me alone.
Hope this helps,
Not all income derived as a notary signing agent is exempt from social security. Only that portion of our income attributable to notary public fees is; all other signing agent income (over and above notary public income) is subject to self-employment (social security) taxes.
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According to the IRS, none of the income is taxable for social security purposes, it does not have to be just the notarize signatures. I have done this for years. All of my business that I do, is because I am a notary. So if you want to give the government your hard earned money towards social security go ahead, but I do not. I take the same amount and invest in my own retirement. I suggest anyone that does not pay into the social security system to invest in their own plans. All of my clients that are notary’s do not pay this tax. I will not prepare the returns with social security tax being paid on the signatures that are not notarized signatures. We are required to witness each signature in the packages that we do. Just because their is no notary stamp, does not make it taxable.
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Disagree…the IRS says "Notary income Fees for services you provide as a notary public are not subject to self-employment tax. However, all of your other self-employment income is subject to self-employment tax.
Example: X is a self-employed attorney and also a notary public. Only the income that X received for services performed as a notary is not subject to self-employment tax. "
Services you provide as a notary public is the notarization - witnessing a signature only is not a notary function. The state mandated fees for authorized notary duties (jurat, ack certifications,) where the stamp is applied are the only fees exempt from self employment tax.
All due respect - you may be an enrolled agent but I think you’ve interpreted this ruling incorrectly and a bit too loosely.
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Linda;
I concur with your interpretation.
Only the statutory notary fees per notary act are exempt from self-employment taxes per Treasury Regs. 1.1402©-2(b)(2). However, notary fees are still included in AGI (Adjusted Gross Income) for the purpose of calculating income tax.
For example, in NY, a fee of $2.00 per notarial act (i.e.: acknowledgement or jurat) would be exempt from SE tax; the SE-exempt amount would still be included on Schedule C/C-EZ and count towards the schedule total, and thus, total income.
FYI, I am also an Enrolled Agent. However I specialize in research (legal briefs, private letter rulings/advance determinations and a priori defense), representation, remediation (fixing others’ errors) and litigation (Tax Court petitions and motion practice, both for federal and certain states).
Most of my clients are CPA’s, other EA’s or attorneys, and use my firm’s work in litigation or audit, thus we always must cite our basis for a position. To paraphrase a song, “If I can’t cite a thing, my butt’s in a sling.”
To make it clear, consider the following scenario:
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A 20 page mortgage or deed of trust is notarized only on the signature page;
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The mortgage/deed of trust is accompanied by a note, again 20 pages with acknowledgement on only the signature page;
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The transaction is supported by a number of documents which the notary must present to the signer, but not all notarize (let’s say yet another 20 pages, with 3 acknowledgements/jurats on single page documents); and
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Let’s assume the fee was $60, to make things nice and even.
So, we have:
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Notarial fees of $10 (5 acts x $2 each), not subject to self-employment tax;
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Signing agent fees of $50 ($60-$10 notarial fees), subject to self-employment tax; and
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Schedule C/C-EZ sales of $60 (both SE-Exempt and non-exempt), included in AGI/taxable income
Expenses (print, phone, mileage, government fees, etc…) would be captured on the Schedule C/C-EZ, which ‘bubbles up’ to Schedule 1, Line 12.
How to Report:
If the taxpayer had no other income subject to SE tax (which would rarely be the case) :
- Report SE-exempt notary fees either on Line 21/other income (with no offsetting expenses) or Schedule C/C-EZ;
- Enter “Exempt-Notary” on Schedule 4 (Form 1040), line 57; and
- Do not file Schedule SE.
If the taxpayer had other earnings of $400 or more subject to SE tax:
- Schedule C /C-EZ, Line 1 would include all signing agent revenue (SE-exempt or otherwise), allowing the notary fees to be included in income tax.
- Enter “Exempt-Notary” and the amount of their exempt notary public fees.from on the dotted line to the left of Schedule SE, line 3. The taxpayer should then subtract that amount from the total of lines 1a, 1b, and 2, and enter the result on line 3. This would decrease SE tax by the appropriate amount.
Readers of this post may feel free to share this information with their tax advisers; they may choose to research the citation for themselves.
HWB.
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Paulette;
As per my other post here, the cited Treasury Regulations only exempt official fees from self employment tax.
I forgot to put in my other post that the this position has been held by the US Tax Court in Ekren v. Commissioner, T.C. Memo. 1986-509 (1986). The court held that only the official fees were exempt from SE tax.
A Tax Court decision, in Memorandum or Opinion form, is an ultimately reliable source of tax guidance; the adjudication process cements the validity of the tax treatment. The decision can be used as defense in audit, examination, tax appeal or any civil/criminal legal proceedings.
Notwithstanding the Supremacy Clause, the exemption stems from the principles of sovereignty that the courts have held are also drawn from our Constitution; a great discussion of these sovereignty principles was put forth by by Watkins in Virginia Law Review, Vol. 24, No. 5 (Mar., 1938) pp. 475-506.
HWB.
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Thank you for that acknowledgment. I have brought this up in several forums and even on a prospective student webinar. But rather than get an answer such as “I’m not sure about that or I haven’t heard about that, I’ll look into it” Re: 22 CFR 22.1 Notary Fees (which also covers general-services a notary can perform. Not a $3 rubber stamp fee)
The answer I got was implying that NSA’s who make above average signing fees is because of the experience and expertise offered.
I differ in my opinion on that. And here is why: If we are to be held to high standards of operations and our operations facilitate the creation of SECURITIES. These commercial transactions which fuel a huge percentage of the global-socio-economic-system; than we ought to recognize ourselves for our critical roles as well.
For starters an impression seal/embossing is much different than a rubber stamp. 22 CFR 22.1 provides that $35 out of office fee, $50 per seal these are just two examples.
Therefore I assert that while no one is above the law and have equal protection of the law—why would it not behoove us to operate using this provided FEE SCHEDULE which can only maximize our earning/potential and set a standard within our “Profession”?
And lastly, it is “Crime” to receive services full or partial without compensation, and when it becomes a pattern and no one speaks up to do anything about it—thats too bad. It’s called “Theft of Services” and “Intention to Defraud”
I have ZERO qualms about contacting these companies who seek to defraud any of us. So if anyone wishes to contact me directly I am obliged to be of service. ~MFR
Your answer is here - the Code you cite is US Code for “CONSULAR SERVICES”… - see below
"§ 22.1 Schedule of fees.
The following table sets forth the new fees for the following categories listed on the U.S. Department of State’s Schedule of Fees for Consular Services:
Schedule of Fees for Consular Services"
You, the notary public, are governed by the fee schedule set by your State.
We’ve gone round and round about this previously. I don’t understand why you don’t this. Your regulator body for your fees is your state. That is who regulates your fees…period.
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