Trustee Income
Client is retired. No income other than Social Security. Acting as Trustee on a CRT, receives $100k of income for service. Will that be reported on 1099? If so, can client fund a SEP IRA for $25k and a Roth IRA for $8k? Client is 80 years old. If the income will not be reported on 1099, how is it likely to be reported? – m
Permalink Submitted by MaryKay Foss on Sat, 2024-07-20 18:38
If someone is a trustee as a business, the trustee fee would be reported on Form 1099-NEC and subject to self-employment tax. An individual who serves as an executor or trustee for a family member, receives no 1099 and does not pay social security tax. In general, you need income subject to social security tax to support a SEP IRA or Roth IRA.
Reporting such income on Form 1040 can be tricky if you’re not in the business of being a trustee. Most software programs treat 1099-NEC income as always subject to SE tax. If there are expenses in connection with being a trustee, they can offset the fee income but they are also difficult to properly report on Form 1040.
Permalink Submitted by Mhotchkiss on Mon, 2024-07-22 11:25
Thank you for the input. How will the CRT report the payment to the TTEE for services? I would think it would have to be reported somehow for the TTEE to then show it on their own tax return. Thanks. – m