Single shareholder corporation, Corporate officer draws a paycheck that is reported on W-2. Can the corporation pay a directors fee to the corporate director, this same corporate officer, and not withhold payroll taxes and report on a 1099MISC?
-
Jiggers, EA -
C or S?
Is it an S or C corp? I'm assuming a C corp because in an S corp it wouldn't matter, no SS would be due if it was part of his net profit distribution. In a C corp it can be done but Director fees are subject to SS on the personal return so what would be the point?Last edited by BOB W; 12-19-2005, 10:07 AM.This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content. -
W-2
Employees on their own Board of Directors the fees "should" be included on the W-2...Comment
-
W-2 versus 1099MISC for Directors Fee
The corporate officer has maxed out on SS for his W-2.
The reason for the directors fee is to set it so that this personal service corporation does not owe any taxes at the corporate level. The bonus check and all payroll is written through ADP and must be done on December 26th. Actual net profit won't be calculated until after that date, late on December 31st.Jiggers, EAComment
-
Director fees are not wages and should not be reported on Form W2. The fees are, however, subject to self-employment tax.Originally posted by Jiggers
Reg. Section 31.3401(c)-1(f): “Thus, directors' fees, to the extent they represent fees paid to the director in his capacity as a director and not as an employee, are exempt from federal income tax withholding.”
Rev. Rul. 72-86: “Fees received by a director of a corporation for performing services on its board of directors are income from a ‘trade or business’ and are includible in net earnings from Self-Employment.”Comment
-
1099misc
It looks like you don't have a choice, issue the 1099misc. I'm curious, how much of a director's fee will be on the 1099misc?This post is for discussion purposes only and should be verified with other sources before actual use.
Many times I post additional info on the post, Click on "message board" for updated content.Comment
-
Been there
Employees on their board-are considerred to acting in an employee capacity. Years ago had bank pres who had his directors fees on 1099 with nice retirement package connected to it-audit they said he was on the board because was an employee(we said stockholder/they said do not have a W-2 then) we gave in the only damage was the retirement deduction. If you were the accountant and the teller at a retail store could you then say I will do the W-2 on the accountant duties, but give me a 1099 for the teller duties. 1099s were established as fine and required for nonemployees. When we were audit the land of ten thousand required more board members than 1 and bank had to have 1 nonemployee. In his case he had other board fees and some expenses, but retirment reduction caused us some additional tax.
Now in Minnesota only requires 1 board member-there would be some cross checking on retirement plans, but guess I should separate director fees with retirement and health plans(?) from the corporation to the extent possible-"if no an employee" I think that must have some interpretation. Corporation has profit sharing plan at 25% ant the schedule C has plan not as good on 20% of director fees. Corp has no health insurance coverage-get above the line on Sch C. Maybe...Comment
Comment