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    #1

    Director fees

    I have a client who was on the Board of a local bank for several years. His compensation was filed on a 1099Misc under nonemployee compensation. We filed this on a schedule C as Director fees for the last several years.

    The problem is that he retired in 2005 from the board, and the bank contributed at that time $150,000 to an annuity for his retirement. He draws 20,000 a year for the next several years off the annuity. The bank is still issuing him a 1099misc with $20000 listed under nonemployee compensation.

    I do not believe that the money should be listed under nonemployee compensation because he no longer does work for the bank.

    What is everyones opinion on how I should file this return? Should he list it as other income and only pay federal and state taxes. The other option is to pay self employment on it, but should he pay all the self employment of just half of it.

    Thanks

    Lester
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    #2
    I'm curious why the income is not reported on a 1099R.

    Does the bank own the annuity? Can he cash out the annuity? In any case I can't see why it would be subject to SE tax.
    In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
    Alexis de Tocqueville

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      #3
      The annuity must be owned by the bank because he can't draw but so much a year, but I'm not sure. I really don't see how he should have to pay SE tax on the money either. What does everyone else think.

      How would I handle it to not subject him to SE tax?

      Comment

        #4
        If the bank bought an annuity for him,

        Originally posted by quicksam View Post
        The annuity must be owned by the bank because he can't draw but so much a year, but I'm not sure. I really don't see how he should have to pay SE tax on the money either. What does everyone else think.

        How would I handle it to not subject him to SE tax?
        then any payments he receives should be shown on a 1099R, not
        a 1099-misc. This would of course reflect true state of affairs, i.e.
        retirement income and not subject to SE tax.

        You reckon people at bank don't know what the hell they're doing?
        (grin)
        ChEAr$,
        Harlan Lunsford, EA n LA

        Comment

          #5
          Originally posted by ChEAr$ View Post

          You reckon people at bank don't know what the hell they're doing?
          (grin)
          I have a client that has a retirement from a bank. Hypothetical numbers

          She withdraws $1000 from the IRA each year
          She has $200 withheld for Federal withholding
          They make the 1099 showing $800 as withdrawn (1000 - 200 taxes) and show the $200 as FWH. And they insist they are right.

          Go figure.

          LT
          Only in government or politics is a "cut in spending" really an increase. It's just not as much of an increase as they wanted it to be, therefore a "cut".

          Comment

            #6
            Lol!

            Originally posted by thomtax View Post
            I have a client that has a retirement from a bank. Hypothetical numbers

            She withdraws $1000 from the IRA each year
            She has $200 withheld for Federal withholding
            They make the 1099 showing $800 as withdrawn (1000 - 200 taxes) and show the $200 as FWH. And they insist they are right.

            Go figure.

            LT
            I rest my case! (grin
            ChEAr$,
            Harlan Lunsford, EA n LA

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