How do I report Board of Directors fees?

[alan.terrell]

I serve on two boards that send 1099 NECs.  How do I indentify?

[JohnW152]

This is self-employment income.

According to Directors’ fees in 2021 Instructions for Forms 1099-MISC and 1099-NEC, the payer of the income “must report directors' fees and other remuneration, including payments made after retirement, on Form 1099-NEC in the year paid. Report them in box 1.”

Amounts reported in box 1 of Form 1099-NEC are considered to be nonemployee compensation – that is, self-employment income.

To report Form 1099-NEC for self-employed income in TurboTax:

1. Open or continue your return

2. Search for self employed income (use this exact phrase, don't add a hyphen) and select the Jump to link at the top of the search results

3. Answer Yes on the Did you have any self-employment income or expenses? screen.  If you land on the Your 2021 self-employed work summary page, select Review next to the work you're adding income for

4. Answer the questions on the following screens until you arrive at Let's enter the income for your work

5. Select the form that applies to your situation and Continue

6. You can enter the info from your 1099 form on the following screens

[NancyEF]

How do I answer this question for Board of Directors Fees? And is a Schedule C required?

[PattiF]

You would choose the last answer: None of these apply to me. A Schedule C is required to report the Board of Director fees. You can deduct any expenses associated with the Board of Directors work that you did such as mileage or office expenses. '

See @JohnW152 above who cited the instructions for 1099-MISC and 1099-NEC about the taxable income for Board of Directors Fees. If you received a 1099-NEC with an amount in Box 1, then it is self-employment reported on Schedule C. 

@NancyEF 

[NancyEF]

Thank you! One last question, does the Board Fees qualify as a Qualified Business Income? 

[PattiF]

It depends, the guidance from the IRS doesn't specify if Board of Directors fees qualify for QBI.

Here are the criteria to qualify for QBI:

From Summit Junto: To qualify for the QBI deduction, your business must meet certain requirements. First, it must be a trade or business under section 162 of the tax code. This includes businesses such as sole proprietorships, partnerships, S corporations, and trusts and estates.

Second, the trade or business must be engaged in a "qualified activity." This generally includes any activity that is conducted for the production of goods or services. So, if your board of directors fees are related to the production of goods or services, they may be considered qualified business income.

The third requirement is that your trade or business must have "qualified property." Qualified property generally includes tangible property used in a trade or business, such as buildings, machinery, or equipment. It also includes intangible property used in a trade or business, such as patents, copyrights, and trademarks.

So, if your board of directors fees are related to the use of tangible or intangible property used in a trade or business, they may be considered qualified business income.

The fourth and final requirement is that your trade or business must have "qualified employees." Qualified employees generally include any full-time employee who works for the trade or business for more than half of the year. So, if your board of directors fees are related to the employment of full-time employees who work for the trade or business for more than half of the year, they may be considered qualified business income.

Of course, this is just general guidance from the IRS. Board of directors fees may or may not be considered qualified business income depending on the specific facts and circumstances of your case. If you're not sure whether your board of directors fees are qualified business income, you should speak with a tax advisor.

@NancyEF