Peter Smith is retired. However, he still serves as a director of the Northwest
ID: 2450432 • Letter: P
Question
Peter Smith is retired. However, he still serves as a director of the Northwest Corporation, which pays him a $12,000 yearly director's fee. Mr. Smith knows this income is taxable, but he wants to know whether it is subject to self-employment tax as well. Write a tax research memorandum addressing this question. Peter Smith is retired. However, he still serves as a director of the Northwest Corporation, which pays him a $12,000 yearly director's fee. Mr. Smith knows this income is taxable, but he wants to know whether it is subject to self-employment tax as well. Write a tax research memorandum addressing this question.Explanation / Answer
To: MR Smith
From: Nathen
RE: applicability of self-employment tax
Facts:
Smith is retired and he is still serving as a director of N corporation, he wants to know the self-employment applicability for his service.
Analysis:
Even though he is retired and he is receiving fee from the corporation , so, that is need to be considered as the income from the previous employment and self-employment tax can be levied on it.
Conclusion:
In this case smiths need to pay both the income tax and self-employment tax. There is no exemption from the self-employment taxation
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