TN 10 (02-92)
RS 02505.185 Corporate Director Fees - Earnings
A beneficiary serving as the director of a corporation is engaged in self-employment. However, the director of a corporation may also perform services as an employee e.g., services as the president of the corporation.
Prior to the 1987 amendments, director fees were counted under the ET in the year the beneficiary reported the fees for tax purposes (unless the SEI exclusion in RS 02505.125 applied). Generally, fees were reported as NESE for the year the fees were received.
Under the 1987 amendments, fees for performing services as the director of a corporation in a TY that began after 1987, were required to be reported for both ET and tax purposes, in the TY the services were performed, unless such fees were actually paid or received before that year.
Under the 1990 amendments, fees for serving as the director of a corporation in a TY that begins after December 31, 1990, must once again, be reported for tax (and computational) purposes, as they were before the 1987 amendments i.e., in the taxable year the fee payments are received. However, the 1990 amendments did not change the requirement that director fees must be counted under the ET in the taxable year the services were rendered.
B. POLICY - HOW FEES ARE COUNTED
Fees for serving as the director of a corporation are counted under the ET as NESE.
C. POLICY - WHEN FEES ARE COUNTED
1. Service performed in TY that began before 1988
Count in the year the fees are reported for tax purposes unless the SEI exclusion provisions apply.
2. Service performed in TY that begins after 1987
Count in month/year services are performed.
D. POLICY - APPLYING SEI EXCLUSION
Apply the SEI exclusion if applicable as provided in RS 02505.125ff if the fees are for services in a TY that began before 1988.
Do not apply the SEI exclusion to fees for services performed in a TY that begins after 1987.
E. POLICY - POSTING FEES FOR ENFORCEMENT PURPOSES
Post director fees for enforcement purposes to the unposted detail section of the MEF in the following cases:
The SEI exclusion provisions in RS 02505.125ff are determined to apply to the director fees, in which case post to the year the fees are received, in accordance with RS 02510.020.
The director fees are for services performed in a TY that began after 1987 and such income was not received in the year the services were performed. Post to the TY received in accordance with RS 02510.020. See subsection G. below regarding reopenings.
F. POLICY - ACCEPTING ALLEGATIONS
Accept the beneficiary's allegations as to:
Exact amount of the fees
Year the services were performed
Whether or not the fees were reported for ET purposes in the year services were performed
Year fees will be (or were) reported for tax purposes
Develop only if there is reason not to accept the beneficiary's allegations, e.g., the beneficiary does not know the exact amount of the fees.
G. POLICY - REOPENING PRIOR DETERMINATIONS
Reopen a prior determination made under the ET, subject to the rules of administrative finality in GN 04030.030, if the allegation of the beneficiary or other credible evidence supports reopening and benefits will be affected. Do not develop soley to support a reopening.