1101.1 How is trade or business defined?
For Social Security purposes, the term “trade or business” has the same meaning as when used in section 162 of the Internal Revenue Code relating to income taxes. However, certain occupations and the self-employed activities of members of certain religious groups who have been granted exemptions from the self-employment tax are not included in the term “trade or business” for Social Security purposes. They are included only if certain conditions are met.
1101.2 What are the guidelines for determining trade or business activity?
“Trade or business” is not specifically defined in section 162 of the Internal Revenue Code. However, certain guidelines for deciding whether a trade or business exists have been set forth in court decisions and Internal Revenue Service rulings. Briefly stated, these guidelines are:
You started and carried on the activity in good faith with the intention of making a profit or producing income;
You carried on the activity regularly, with a continuity of operation, a continual repetition of transactions, or a regularity of activities;
The activity is your regular occupation or calling that you carry on to make a living or a profit; and
You present yourself to the public as being engaged in the selling of goods and/or services.
Any one of these factors standing alone is not enough to show that a trade or business exists, but not all the factors need be present.