Our board members attend a conference in Hawaii every year and take a guest. We take the per diem for the area they are in times the days, and send out a 1099-MISC. Is this considered executive compensation, and does the 1099 goes to the board director?


The type of reimbursement plan you are under—accountable or non-accountable—will determine what is considered compensation. In general, if a spouse goes to retreat with an executive and the company picks up the full tab including the spouse, then the spouse's portion of expense would likely be a fringe benefit added to the executive's compensation. Fringe benefits for employees are addressed in IRS Publication 15-B.

Another area to keep track of is any excess over the per diem. Revenue Ruling 2006-56 establishes new punishment for employers who fail to accurately monitor their employees' travel expense reporting. If an employer routinely provides expense allowances above the federal per diem rate and does not receive expense documentation or reimbursement of excess per diem from the employee, then the money is considered taxable income. Moreover, taxes on the expense amount, including the original allowance and the excess, must be paid by the employer, not the employee.

In regard to the independent non-employee board members, 1099 filing depends on whether the director accounts for his or her expenses to you. You do not include reimbursed expenses on a director's 1099 if the director has accounted for those expenses by providing you documentation of those expenses under an accountable plan as defined by the IRS. You do include reimbursed expenses on the 1099 if the director does not separately account for the expenses (in which case the director may claim a deduction for the expenses on his/her own tax return). Reporting the spouse's portion of the trip would depend on whether management will honor the request and reimburse for it.

We also encourage you to seek the advice of your tax advisors who know your particular situation for proper tax treatment.

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