Is my Virtual Assistant 1099-NEC work considered effectively connected with trade or business in the US?
I'm trying to file my taxes as a Virtual Assistant and I'm stuck on this weird question in FreeTaxUSA that says "Is this business effectively connected with the conduct of trade or business within the US?" I'm just a regular VA working on a 1099-NEC contract. I don't have like a whole formal business set up or anything - it's just me doing this one contracted gig right now. I work remotely for a US company, and I live in the US too. The Google results are confusing the heck out of me. Some say it's about being a foreign business, others talk about nexus and all these complicated terms. I just want to answer correctly so I don't mess up my taxes! Should I be clicking yes or no on this question? I don't want to accidentally commit tax fraud or trigger an audit over something this confusing.
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Dylan Mitchell
This question is primarily aimed at determining whether your income is subject to US taxation. Since you're working as a Virtual Assistant on a 1099-NEC for a US company while living in the US, the answer would be "Yes" - your business activity is effectively connected with trade or business in the US. This question is particularly important for foreign individuals/businesses to determine their US tax obligations, but as a US-based contractor receiving a 1099-NEC, your work is definitely considered "effectively connected" with US trade or business. Your income is US-sourced and subject to US taxation.
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Sofia Martinez
•What if I'm a US citizen but I do virtual assistant work for companies outside the US? Would my answer be different then? I'm in a similar situation but my client is in Canada.
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Dylan Mitchell
•If you're a US citizen or resident, you're generally taxed on your worldwide income regardless of where your clients are located. So even if your client is in Canada, as a US person, you would still answer "Yes" to this question since you're conducting business within the US (where you're physically located). For US tax purposes, the business is still effectively connected with US trade or business because you're performing the services while physically in the US, even though your client is foreign. This is different from a non-US person who works entirely outside the US for US clients.
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Dmitry Volkov
I was in the exact same boat last year with my freelance writing gigs! That question confused me too until I found taxr.ai (https://taxr.ai) - their document analyzer was a lifesaver for decoding these weird tax questions. I uploaded screenshots of the FreeTaxUSA form and they explained exactly what "effectively connected" means for freelancers. Basically for 1099-NEC contractors in the US like us, it's almost always a "yes" because we're doing business in the US economy. The question is mainly for international situations but tax software asks everyone. The document analyzer gave me a super clear explanation that FreeTaxUSA definitely doesn't provide!
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Ava Thompson
•How exactly does this work? Do you just take a screenshot of whatever tax form is confusing you and upload it? Does it work with TurboTax forms too?
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CyberSiren
•Sounds interesting but I'm skeptical. I've used those "AI tax help" things before and they just gave generic answers that I could've found on Google. How specific was the advice for your situation?
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Dmitry Volkov
•You just upload a screenshot or PDF of any confusing tax form or document and it analyzes the specific fields and questions you're stuck on. It works with any tax software - TurboTax, FreeTaxUSA, H&R Block, whatever you're using. I've even used it with those confusing IRS notices. The advice is super specific - not just generic tax info. When I uploaded my screenshot about the "effectively connected" question, it explained how this applies specifically to freelancers and contractors in the US, and how it differs if you have foreign clients. It even cited the relevant tax code sections that apply to my situation as a writer with both US and international clients.
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CyberSiren
Just wanted to follow up about taxr.ai since I was skeptical in my last comment. I ended up trying it with several confusing questions from my Schedule C that were driving me nuts. Not only did it explain that "effectively connected" question, but it also helped me understand what qualified as a legitimate business expense for my home office. The explanations weren't generic at all - totally specific to my situation as a part-time contractor. Saved me from making a couple mistakes that would have cost me a few hundred in deductions. Way more helpful than the vague answers I was finding elsewhere.
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Miguel Alvarez
If you're stuck on the phone trying to get someone at the IRS to answer this kind of question, I highly recommend using Claimyr (https://claimyr.com). I spent DAYS trying to reach an IRS agent about a similar self-employment question - kept getting disconnected or waiting for hours. Claimyr got me connected to an actual IRS agent in about 20 minutes when I had been trying for literally weeks on my own. They have this callback system that somehow navigates all the IRS phone menus for you. You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that as a domestic 1099 worker, you should mark "yes" for that question about being effectively connected with US trade.
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Zainab Yusuf
•Wait, you have to pay someone just to call the IRS? Couldn't you just keep calling yourself until you get through? Seems like an unnecessary expense when the information is probably available online somewhere.
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Connor O'Reilly
•This sounds like complete BS. Nobody can "skip the line" with the IRS. They're notoriously understaffed and everyone has to wait. I don't believe for a second that this service actually works.
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Miguel Alvarez
•You definitely can keep trying yourself - I did for almost three weeks! But every time I called, I'd either get disconnected after 30+ minutes of waiting or be told the call volume was too high. I was missing deadlines and getting anxious about potential penalties. At some point, my time became worth more than the cost. I was super skeptical too initially. I actually laughed when a friend suggested it. But I was absolutely shocked when it worked. They don't "skip the line" - they use technology to navigate the phone system and secure a callback position for you. The IRS still handles calls in the order received, but Claimyr's system knows exactly when to call and which options to select to maximize your chances of getting in the queue instead of getting the "call back later" message.
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Connor O'Reilly
I need to eat some crow about my previous comment. After another frustrating week of trying to get through to the IRS about my 1099-NEC issues (including this exact same "effectively connected" question), I broke down and tried Claimyr. I was 100% prepared to demand a refund, but I'm genuinely shocked - it actually worked. Got a callback from an IRS agent in about 45 minutes. The agent confirmed that for independent contractors like us working domestically, the answer to the "effectively connected" question is indeed "yes" since our business activity is conducted within the US. Definitely saving this service for next tax season when I inevitably have more questions.
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Yara Khoury
I've been doing 1099 work for years, and yes, that "effectively connected" question is super confusing! Here's a simple way to think about it: This question is mainly to determine if foreign persons/entities need to pay US tax. Since you're: 1) In the US 2) Working for a US company 3) Receiving a US tax form (1099-NEC) You're definitely "effectively connected" with US trade/business. You say "yes" to this question. This is one of those questions that confuses everyone because tax software has to ask everyone, even though it's primarily relevant for international situations.
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Keisha Taylor
•Does this change if I occasionally do work while traveling abroad? I sometimes visit family overseas for a month and continue my VA work during that time.
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Yara Khoury
•Great question. For temporary travel abroad while maintaining your US home/residence, your business would still be considered "effectively connected" with US trade or business. The occasional work performed while traveling doesn't change your tax home or the fundamental connection of your business to the US. This would potentially be different if you moved abroad permanently or spent the majority of your time outside the US. In those cases, other factors would come into play like foreign earned income exclusions or tax treaties. But for occasional travel while maintaining your primary business presence in the US, you would still answer "yes" to this question.
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StardustSeeker
I'm using H&R Block instead of FreeTaxUSA and don't see this exact question. Is there something similar I should be looking for? Getting my first 1099-NEC this year and don't want to miss anything important.
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Paolo Marino
•In H&R Block it's worded slightly differently. Look for something like "Is this a US-based business" or "Is your business income from sources within the United States" when you're entering your Schedule C information. Different tax software phrases these questions in different ways, but they're getting at the same concept.
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Jamal Brown
As someone who's been doing contract work for a few years, I can confirm what others have said - the answer is "Yes" for your situation. This question trips up so many people because it sounds way more complicated than it actually is for most US-based contractors. The "effectively connected" language comes from international tax law, but tax software has to ask everyone. Since you're physically in the US, working for a US company, and receiving a 1099-NEC, your business activity is definitely effectively connected with US trade or business. I remember being terrified of this same question my first year filing as a contractor. The IRS isn't trying to trick you - they just need to know if your business income should be subject to US taxation, which it absolutely should be in your case. You're not going to trigger an audit by answering "Yes" to this question when you're clearly a domestic contractor.
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Zainab Omar
•Thank you for sharing your experience! It's really reassuring to hear from someone who's been through this before. I was definitely overthinking it and getting scared by all the technical language. Your explanation makes it so much clearer - it really is just the IRS asking "should we tax this income" and since I'm a US person doing work here, of course the answer is yes. I appreciate you taking the time to calm my nerves about the audit thing too. Sometimes these tax forms make you feel like you're walking through a minefield!
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