As a trustee, am I subject to self employment tax?

August 15, 2011

From:  Al
Date:  Thu, 31 Dec 2009

I am a Co-Trustee of a Trust (Foundation). Our main duties as Co-Trustees are to approve/disapprove of the investment recommendations of a professional investment advisor and to approve/disapprove grant applications for various 501(c)(3) applicants. I am paid a monthly fee for my participation. Would you consider this scenario as one that would subject my fees to the SE tax?

Thank you,
Al

Answer

Date:  8 Jan 2010

Hello Al,

Probably.

A scenario described by the IRS for non-professional fiduciaries in Rev Rul 58-5 that is not subject to self-employment tax probably doesn't apply to you, because yours is a long-term assignment. A trustee of a Massachusetts real estate trust was held to be engaged in the "trade or business" of being a trustee for self-employment tax purposes. (C.E. Clarke, 27 TC 861, Dec. 22,266.)

On the bright side, being self-employed means you may be eligible to set up your own retirement plan.

Good luck!


Mike Gray

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