Directors and employees receive distributions from N-Q Plan after retirement, W-2 or 1099R?

[Guest Lisha]

After reaching retirement age, select employees and directors (some of whom were outside directors) are going to receive monthly distributions from a general company account (not a qualified plan). We would like to know if these individuals are to receive W-2s or 1099s to reflect the amounts?

Could someone provide some guidance on when a W-2 is appropriate, and when a 1099 is appropriate.

Also, where can we find the official word on the correct document to issue?

Thank you.

[Guest Jimmy]

Why wouldn't a director (even a director who is not an employee) just get a W-2 like any other participant?

[Lori Friedman]

Is the paying entity a for-profit business? I believe that all of the distributions, including payments to former nonemployees, get reported on Form W-2. You report the amount in Box 1 and again in Box 11. As far as I know, Form 1099-R is used only to report distributions to decedents' beneficiaries. Does anybody out there have different information?

Are you working with a tax-exempt organization? If yes, then you have some more complicated issues to consider long before you start to prepare any forms.

[RCK]

The instructions to the 2004 W-2 say that distributions from NQ plans are to be reported in Box 1 and Box 11. (Bottom right of Page 8. I'd include a link but . . . .)

RCK

[david rigby]

My read of the W2 instructions http://www.irs.gov/pub/irs-pdf/iw2w3.pdf

indicates prominent use of the word "employee". If Directors are employees, then perhaps the W2 is the appropriate form; however, that is not my understanding of the relationship between company and director.

Perhaps a 1099MISC ?

[mbozek]

Outside directors are independent contractors who receive 1099s not w-2 because there is no income or FICA witholding on the payments. NQ plan payments to employees are reported as W-2 income. Reg. 35-3405-1T A-18.

[Lori Friedman]

The instructions to Form 1099-MISC answer our question about NDCA payments to a nonemployee director:

Directors' fees. You must report directors' fees and other renumeration, including payments made after retirement, on Form 1099-MISC in the year paid. Report them in Box 7.

[Kirk Maldonado]

mbozek:

In the case of a former employee who didn't receive any other income from the empoyee in a subsequent year, would you also issue that person a Form W-2?

That seems inconsistent with the position asserted in Revenue Ruling 71-52, but I don't know whether the IRS has formally abandoned the position taken way back then.

[Lori Friedman]

Kirk, you might want to take a look at Notice 2001-14, which obsoleted Rev. Rul. 71-52.