FAQs for government entities regarding Schools and Teachers
These frequently asked questions and answers are provided for general information only and should not be cited as any type of legal authority. They are designed to provide the user with information required to respond to general inquiries. Due to the uniqueness and complexities of Federal tax law, it is imperative to ensure a full understanding of the specific question presented, and to perform the requisite research to ensure a correct response is provided.
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A school district pays its coaches a fee for their services. Should the district report these payments on Form W-2 or Form 1099? Coaches are hired under a contract each season. The schedule of practice times, game times and locations is set by the athletic director of the school. The school provides equipment, referees, time keepers, insurance, medical coverage for the players, etc. The school provides transportation to games and liability insurance. It issues general instructions under which the coach works.
School coaches, like teachers, are subject to sufficient control that they are typically employees under the common law. The school district has a right to control the manner and means by which coaches and athletic directors perform their functions.
There is generally no basis for concluding that a high school coach is engaged in an independent trade or business. A coach does not have the freedom of action characteristic of an independent contractor, but must function under policies and regulations established for the school. Additional important factors are that a coach has no investment in facilities, has no opportunity for profit or loss, is an integral part of the school's trade or business, and must perform his services personally. A coach performs his services on school property, on a schedule established by the school. Schools are liable for negligent or tortious conduct of their faculty members. The fact that a coach's remuneration is termed a fee" or "stipend" rather than salary or wages is immaterial. Generally, payments to school coaches are wages subject to applicable employment taxes and should be reported on Form W-2.
A school district has a 218 agreement which covers employees who are not teachers. School board members for this district meet 10 times a year and are paid a fee of $25 per meeting. Are these individuals employees, and, if so, are their fees subject to withholding, OASDI and Medicare taxes?
Officers, employees and elected officials of states and their political subdivisions and instrumentalities are employees for purposes of income tax withholding under Internal Revenue Code section 3401(c). Are school board members public officials?
The Code does not define the term "public official," but section 1.1402(c)-2(b) of the Income Tax Regulations gives the following examples: the President, the Vice President, a governor, a mayor, the Secretary of State, a member of Congress, a state representative, a county commissioner, a judge, a justice of the peace, a county or city attorney, a marshal, a sheriff, a constable, a resistrar of deeds, or a notary public.
Under federal law (Supreme Court cases), an office is a public station conferred by the appointment of a government. The term embraces the idea of tenure, duration, emolument and duties fixed by law. Where an office is created, the law usually fixes its incidents, including its term, its duties, and its compensation. Metcalf & Eddy v.Mitchel, 269 U.S. 514, 520 (1926). Officers and employees are agents of a state or political subdivision to administer its laws. The independent contractor has liberty of action which excludes control or the right to control characteristic of the employer- employee relationship. Id. at 521. An official operates with a certain amount of independence under the law, but the law also usually specifies a chain of command, including provision for an official's removal. A public official usually takes an oath of office. An elected official is responsible to the electorate.
It is necessary to consult the statutes or ordinances establishing a position to determine whether the position is a public office. In the case of school boards, consultation of state statutes, and their annotations, is likely to provide ample evidence that school board members are public officials.
Statutory provisions and cases often make it clear that a school board member is subject to a degree control likely to make him or her a public official whose compensation is subject to income tax withholding. This situation is likely to prevail throughout the nation. Boards of education, water boards, and other boards and commissions are created by state statute. Consultation of these statutes is likely to show that these positions are defined as public officials of the states or their political subdivisions or instrumentalities.
Are school board members whose compensation is called "fees" properly treated-as fee-based public officials?
No. Their compensation is wages subject to FICA tax. A fee-based public official is one who receives compensation in the form of fees directly from the public with whom he does business, for instance, a notary public. Rev. Rul. 74-608, 1974-2 C.B. 275. It does not matter what an official's compensation is called or how often it is paid. If the individual is an employee and receives compensation from a public employer rather than directly from members of the public, his or her compensation is subject to FICA tax.