Withholding Rules for Non-Employee Directors

[smm]

Employees who participate in a NQDCP get the benefit of the "special timing" rule in Code Section 3121. My reading of the rules for non-employees/directors is that they do not get the benefit of the "special timing rule" and Social Security/SECA taxes are due at the time payments are made from the plan, regardless of when services are performed. Does anyone agree/disagree?

Thanks.

[mbozek]

Non employee directors are regarded as self employed persons subject to SECA tax under IRC 1401. SECA tax is levied on net earnings from self emplyment under IRC 1402(B). Section 3121(v) rules for wages do not apply.

[smm]

I agree with you. Therefore, no special timing rule applies and the director is taxed when the distribution is made.