Indirect Compensation

[Guest RD73]

Any opinions whether compensation to a service provider that is not taxable compensation to a service provider (for example where there is an exclusion under IRC 132 from taxable comp. Thus, not reported on a 1099) but that same compensation meets the definition of "indirect compensation" under Schedules A and C?

For example, a service provider hosts an educational event for TPAs. The Service Provider can take a deduction for the expenses. Also, the Service Provider is not required to report the value received by the TPA as compensation on a 1099 due to the exclusion under IRC 132. However, Schedules A and C have a broad definition of compensation (both direct and indirect) that would capture the value received by the TPA, which must be reported on Form 5500.

It seems that since there is no similar exclusion from 5500 compensation as there is for taxable comp that such compensation would have to be reported on Schedules A and C. There are only two options here, one is to report the compensation on Form 5500 and the other is to exclude it since it is not taxable compensation. In other words, report the “indirect compensation” on Schedules A and C even though it is not taxable comp reported on 1099, or not report on the Schedules because it is not taxable compensation.

Any thoughts?