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RD
RD, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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Can an outside director ask that his directors fee be ...

Resolved Question:

Can an outside director ask that his director''s fee be paid to his employer so that it will not be counted as personal income to him?
Submitted: 6 years ago.
Category: Tax
Expert:  RD replied 6 years ago.

Did the company engage the services of the director directly or did it employ the services of the employer who than assigned the director for the job?

 

Customer: replied 6 years ago.
Reply to RD's Post: If I understand your question correctly, the employer assigned the director - the director was not selected individually.

The facts of the situation are basically - 4 corporations are joint investors in another company. Each of the 4 corporations appoints a director to the joint company. The directors receive compensation for their service on the board, but one director does not want the tax consequence of the director's fees being counted as personal income to him. He would like to have his director's fees paid directly to the corporation he represents so that these fees would not be counted as personal income to him. He wants it counted as income to the corporation he represents instead. Can he do this? If so, how? Would a simple letter to the joint company asking that any compensation for his service on the board be paid directly to the corporation he represents and not to him?
Expert:  RD replied 6 years ago.

Yes, in that case(if the original contract was between the employer and the corporation) compensation to the Director can be paid to the corporation. However, how will the director get his compensation in this case. In order to get the remuneration the corporation will than have to pay the Director. SO the final tax impact would be the same whether he receives it directly or the corporation receives it.

 

Let me know if you have any question.

 

Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases. Nothing contained in this reply was intended or written to be used, can be used by any taxpayer, or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986, as amended.

 

Customer: replied 6 years ago.
Thank you for your answer. The director does not want the additional compensation (director's fees) over and above what he already makes from his employer. He's happy for the employer to get the money and the tax consequences. Is there a reference like an IRS Bulletin or something that I can put in my file to support the answer?
Expert:  RD replied 6 years ago.

There is no IRS bulletin or other reference available for this situation.

It is more like a normal business situation. For eg. if a software consultant is being employed by XYZ Co than he gets his payment from XYZ Co. But, XYZ Co can have him work for their clients such as Cisco, Microsoft or any other corporations. Do thought the software consultant works for all these big companies his remuneration is from XYZ CO and this clients (Cisco, Microsoft etc) pay XYZ Co for these services.

Similar analogy will apply to your situation.

 

RD, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 8784
Experience: CPA, MBA, Over 10 yrs of experience in tax planning and business consulting..
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