Member of Board of Directors Fees & Expenses

[Zee]

Member of BOD serves as Temporary (1-1/2 years) Acting President of the same company after acquisition. He commutes 2-3 times a week from NJ to GA and receives compensation in the high six figures reported on Schedule C including medical bills paid, travel back & forth to his home, and meals & lodging. He was issued a 1099 only for the compensation and medical bills paid and paid no taxes for meals & lodging. My initial reaction is the travel, meals & lodging are taxable compensation. However, if it was reported to him as non-employee compensation on a 1099, they could also be deducted. Then, I thought about the temporary nature of the situation although 1-1/2 years may be a "stretch" in which case the deductions at the Corporate level would be ok.

Oops! I forgot to add he's also provided $5000 mo for other expenses on a non-accountable basis which was also not added to his 1099. I don't believe there's much doubt this should be added as income.

I'd greatly appreciate any input/thoughts of others. Thanks!

[Burke]

The $5K should be considered income, yes. What did you mean by "paid no taxes on meals & lodging?" Estimated taxes? Is he reimbursed actual expenses for the travel, meals & lodging by furnishing receipts? Interesting about the medical bills. What do they have to do with Board compensation? As acting President, it sounds to me like he is an employee. I doubt if the BOD meets that often. Are the other BOD members being paid "in the high six figures?" If he is commuting that far 2-3 times per week, then he must be flying. So his meals & lodging are at the place of employment, not en-route? I think there is a real problem here with 1099 vs W-2 compensation given all the facts.

[Zee]

The $5K should be considered income, yes. What did you mean by "paid no taxes on meals & lodging?" Estimated taxes? Is he reimbursed actual expenses for the travel, meals & lodging by furnishing receipts? Interesting about the medical bills. What do they have to do with Board compensation? As acting President, it sounds to me like he is an employee. I doubt if the BOD meets that often. Are the other BOD members being paid "in the high six figures?" If he is commuting that far 2-3 times per week, then he must be flying. So his meals & lodging are at the place of employment, not en-route? I think there is a real problem here with 1099 vs W-2 compensation given all the facts.

Thanks for the response, the $5000 is monthly...$60,000 not $5,000. I believe all the meals, lodging, and travel costs should have been included on the 1099 as income, hence taxable. I've learned that the BOD was Acting President for a very long time...far too long to be considered "temporary". I would agree he should have been treated as an employee, rather than an Independent Contractor, but in either case all the expenses would be taxable income (with the possible exception of meals with clients, etc.).

[Roland Slugg]

Seems pretty clear to me that the man is an employee of the company, not an IC. If he is, then everything belongs on a W-2, not a 1099.

[Burke]

Agree. They are paying him as President, not a BOD member. My state requires an annual report to be filed with the State listing all officers and directors. GA State Dept also requires a similar report which can be accessed on-line. If he is listed there as an officer, then he is an employee. The income can be accounted for, and it all looks like it is taxable, unless he was using an accountable plan for reimbursement of certain expenses. Problem is, where the expenses are going to be deducted. And his meals and lodging look like normal living expenses, not deductible. The travel is commuting. The medical bills on Sche A. What a mess.