The Tax Man Cometh

[DieterS]

Hi all,

On a radio program this morning, the commentator noted that the IRS has now started cracking down on paid coaches and referees of youth sports. Typically, they are paid as independent contractors and the organization files a 1099 for the amount disbursed.

However, the IRS claims that these folks are NOT independent contractors because they do not determine where, when, and how they provide their services. Thus, the IRS is now claiming that they are, in fact, EMPLOYEES and that employment taxes are due to the IRS. The commentator noted that should you feel that you might be snagged by the IRS, you should contact a tax advisor soon.

Personally, I think that the IRS position is arguable--otherwise many service providers (musicians come to mind, also armorers) would also be vulnerable. I believe that the commentator left out the defense that (1) you have more than one client, and (2) that you have established and filed taxes as an independent business.

Anyway, a word of caution.

Dieter
Eigertek

[seven6ty]

Just refuse to pay taxes, as a non-violent form of protest! :-D

[lindajdunn]

Just refuse to pay taxes, as a non-violent form of protest! :-D

A former co-worker did that. I forget how much the IRS fined him in back taxes, penalties, etc.

[Beloit Fencer of Old]

As an individual who works in the field of financial advice, and as an individual with a degree in economics, I have to say that I FREAKING HATE THE IRS!

Declaring an independent contractor an employee is not something new for them. The IRS really does not like this form of employment.

I think that the IRS forgets that it is we, the people who work and produce goods and services, who keep this country running. The IRS is simply a leach on our collective ass.

Coaches...perhaps you should begin to ask your students to pay in green folding money...and tell the IRS that if they can find it, they can take it and stick it up their

[DieterS]

Just refuse to pay taxes, as a non-violent form of protest! :-D

Protest against what?

Your taxes pay for Important Programs that you voted for when you elected your representatives!

Thousands of agencies are hard at work employing ever-increasing millions of seriously overworked civil servants, bureaucrats, functionaries, and consultants who are dedicated to make sure you have complete confidence that

• Your environment is Absolutely Protected.
• Your food and products are Completely Safe.
• Your CHILDREN obtain the finest education money can buy.
• The POOR are provided with agencies and programs to ensure that your guilt for having cable TV is completely absolved.
• Your county's sovereignty and borders are absolutely air-tight and secure.
• You have many talented politicians to entertain you.
• You can feel that life is completely FAIR in all respects and that scapegoats are provided and occasionally sacrificed.
• You are socially secure, so you won't ever have to save for retirement.

<pause to wipe tears from eyes>

These and many more benefits far too numerous to list, are being provided for you . . . for which you begrudge just a few paltry dollars!

Shame on you!

Dieter

[Capt. Slo-mo]

This pretty much explains exactly what Dieter is talking about:

http://www.youtube.com/watch?v=pvsADU2OOWM

[4qtrs]

[*]You have many talented politicians to entertain you.

Sadly you are right on there.

[oso97]

Well, the IRS may declare referees "employees" and with all the effects that has on taxes and such, but then, as I understand it, the onus is then going to be on the USFA to prove that we're not employees, yes? Because, they're the ones who have to file the 1099 or the W4. How can an individual be held responsible for how the organization chooses to classify them?

[jjefferies]

This pretty much explains exactly what Dieter is talking about:

http://www.youtube.com/watch?v=pvsADU2OOWM

Watched that piece. Real Slick! Then I wondered who had the money to have it made? Cost a pretty penny to produce such a professional video. And then realized the video named them as "Wealthy People". Really sounds like someone trying to set up for a third intention which they aren't open about.

Personally I think the IRS ought to focus on the tax dodges of the wealthy. I'm forever being astounded by the lengths so many of our wealthy friends will go to to keep from paying their share. And I've had to go through a lot with the IRS in the past couple of years so I understand the frustrations.

My question is "what will the impact be on Universities, such as Cal, who hire/contract coaches through their sports clubs". Will they actually have to pony up for benefits or at least make them available?

[DieterS]

My question is "what will the impact be on Universities, such as Cal, who hire/contract coaches through their sports clubs". Will they actually have to pony up for benefits or at least make them available?

I watched it too--hilarious! But the reason that I originally posted was not to poke fun, rather exactly the issue you're bringing up.

A plumber doesn't control when, where, and how the work is performed, but a plumber is not a homeowner's employee by any means.

Hopefully, this won't put an unfair burden on sports programs! Also, I think the USFA should take note now, not after they're fined by the IRS.

Dieter

[fencerbill]

Personally I think the IRS ought to focus on the tax dodges of the wealthy. I'm forever being astounded by the lengths so many of our wealthy friends will go to to keep from paying their share. And I've had to go through a lot with the IRS in the past couple of years so I understand the frustrations.

Not while Bush is president. Too many conservative political contributors.

(This thread is headed for another forum - probably the water cooler)

[DieterS]

Not while Bush is president. Too many conservative political contributors.

(This thread is headed for another forum - probably the water cooler)

No. Please don't head it in that direction. The point of my original post was to alert coaches, referees, and other paid people associated with fencing to watch out for the tax consequences, not to poke fun at the IRS, nor to make partisan statements about president Bush.

I think this is a potentially serious issue that can get people and organizations in trouble.Think what the IRS could charge the USFA in taxes and penalties for all the years that they paid coaches and referees.

Dieter

[fencerX]

No. Please don't head it in that direction. The point of my original post was to alert coaches, referees, and other paid people associated with fencing to watch out for the tax consequences,

It's not so much the people being paid who need to be concerned, it's the people who are paying them that end up the target.

None of this is new, except maybe the level of enforcement on the IRS' part.

If a club is paying a coach and setting the rates for their lessons, then calling the coach an independent contractor ain't going to fly when challenged. One of the major tests of independence is whether the worker can set their own rate.

If a coach sets their own rates and gets paid by their students directly then it's a different matter. The club isn't employing or even paying the coach and might even be asking the coach or student to pay the club a floor type fee instead.

[DieterS]

None of this is new, except maybe the level of enforcement on the IRS' part.

Yep, that's what the radio commentator said.

One of the major tests of independence is whether the worker can set their own rate.

Ok, let' s try these tests out for refs and armorers at NACs:

1. Sets own rates: NO
2. Controls place of work: NO
3. Controls hours of work: NO
4. Controls how work is done: NO

Looks like refs and armorers are USFA employees to me. Or have I missed something?

Dieter

[KD5MDK]

Chooses entirely on their own whether to attend or not.

[TBean]

The USFA does not pay taxes as it is, they are a non-profit. They file taxes but pay very little. Fines, well yes the IRS could levy fines but more likely they would get a warning first.

The burden for the USFA will be time and monay. The time it is going to take to set up all the folks who ref and armour as employees - although if they issue 1099s they have the information. All coming from different states with different tax laws - if the USFA does not already use a payroll service they would have to get one and that adds costs to operations.

The IRS sucks.

[irishfolker]

This will actually be a benefit for the coaches and a liability to the clubs. The major difference between an employee and an independent contrator is liability for FICA. An employee's FICA is paid by the employee and the employer, while an independent contrator's FICA is paid entirely by the contractor. So, it will save the coaches some money, assuming they were paying their taxes correctly in the first place.

[Insipiens]

We have similar rules applied by HMRC in the UK: if you have multiple clients as a contractor then you are usually safe - which of your clients would be your employer? But what if your multiple clients are club members.
Say you have a coach attached to a club, who is paid directly by those who get lessons, plus runs a class and is paid by the club for that.
Is he really an independent contractor? Does the club set the rate for lessons? Who decided whether or not to coach particular individuals? Does the club organise the lesson rota or the coach? If all the coach does is turn up and give the lessons fixed for him, at the rate fixed for him then there has to be an argument that the club is employing him.
Here in the UK that would also mean the coach had certain employment rights - e.g. holidays, minimum wage, statutory sick pay etc. But not providing those could just be a failure by the club rather than an indication of a coach's status.
On the point of the USFA not paying taxes - does it not have to pay employee taxes for those it employs? Can a not-for-profit organisation avoid paying such taxes in the US?

[oiuyt]

This will actually be a benefit for the coaches and a liability to the clubs. The major difference between an employee and an independent contrator is liability for FICA. An employee's FICA is paid by the employee and the employer, while an independent contrator's FICA is paid entirely by the contractor. So, it will save the coaches some money, assuming they were paying their taxes correctly in the first place.

In a world where economics work they way they ought to in theory it shouldn't change the net pay for the coaches. The club shouldn't care whether they pay $X to the coach and $Y to the IRS or whether they pay $X+Y to the coach. If things change such that the club has to pay FICA that money should come out of what goes to the coach currently.

-B

In theory, theory and practice are the same.
In practice, they are not.

[oiuyt]

On the point of the USFA not paying taxes - does it not have to pay employee taxes for those it employs? Can a not-for-profit organisation avoid paying such taxes in the US?

It absolutely does.

Non-profits still pay things such as employment tax.

-B