Have Tax Questions? Ask a Tax Expert for Answers ASAP
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?
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.
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.