http://www.nytimes.com/2007/08/02/nyreg ... nted=print
August 2, 2007
Youth Soccer Group Agrees to Withhold Taxes From Coaches
By TINA KELLEY
In a case widely watched by youth sports leagues across the country, the Internal Revenue Service has reached an agreement with the Fairfield United Soccer Association that clarifies the employment status of the group’s coaches, the association’s president said yesterday.
Under the agreement, the Fairfield, Conn., league will begin in 2008 to treat about half of its 30 coaches — those not employed by professional coaching associations — as employees rather than as independent contractors, and will withhold taxes from their pay. And the league will pay $11,600 in back taxes, according to Jay Skelton, the group’s president, a fraction of the $334,441 in taxes and fines the I.R.S. had assessed it in 2004.
“We said we tried to comply with the rules, and we thought we were, but we made mistakes, so we agreed to pay the tax due,†Mr. Skelton said. “For 20 years all of these coaches have been reported as 1099 employees for everybody. If you talk to 100 clubs, I guarantee almost every one, if not all, would declare these guys as independent contractors.â€
“Unfortunately,†he added, “we became the test case.â€
The Fairfield league, with 45 elite teams that travel across Connecticut and beyond for tournaments, trains vigorously with paid college-level coaches. Its budget, raised from player dues, ballooned to $392,000 in 2004, according to tax returns.
It was not the first time the I.R.S. had fined a nonprofit youth sports league, but the proposed penalty was one of the largest, sending worried sports officials in Connecticut and other states scrambling to review the tax code. Mr. Skelton said that over the last two years, about 200 people involved in youth sports had contacted him asking about the resolution of the case. He said the assessment had threatened to put the Fairfield association out of business.
Yesterday, Mr. Skelton said the association’s accountants and advisers had not yet determined whether the league would have to provide medical and retirement benefits for its employees.
“If you hire somebody part time, generally you’re not mandated by law to give them any benefits at all,†said Alan S. Goldberger, a lawyer based in Clifton, N.J., who specializes in sports law.
The group’s referees, many of whom are students, will still be considered independent contractors, and the association will not have to pay withholding taxes for them, Mr. Skelton said. When the league started a decade ago, many of its coaches and referees were parent volunteers; now it pays $2,500 a year to several dozen coaches with serious soccer skills, and $20 to $40 per game for older children to officiate at younger children’s games.
Rob Marvin, a spokesman for the I.R.S., declined to comment yesterday. In an interview last year, another spokesman, Bruce I. Friedland, said that the agency had “an important interest in proper classification of workers†and that groups sometimes intentionally mischaracterized employees as contractors “to avoid paying employment taxes.â€
Generally speaking, if an organization has direct control over a person’s work, he or she should be considered an employee; independent contractors work for a variety of clients, supply their own equipment, and can refuse assignments.
Jim Cosgrove, executive director of the United States Youth Soccer Association, an umbrella group that offered a tax seminar at its national convention last year, said that he had not yet seen the settlement but that it would probably resonate across the nation, where more than three million children play on its teams.
“I certainly think it could have implications for youth soccer and for other youth sports as well,†he said.
Mr. Skelton of the Fairfield association estimated that the new arrangements might increase the average cost for a student to play for a season to $335, from $325.
He said that the association had hired a certified public accountant to work specifically on tax issues, and that he hoped the resolution to the audit would encourage volunteers to return to the association. Some board members had faced the possibility of personal liability for the back taxes and fines, he said.
The group operated this spring with the same number of teams, 45, and players, about 800, but about a tenth of the volunteers, he said.
August 2, 2007
Youth Soccer Group Agrees to Withhold Taxes From Coaches
By TINA KELLEY
In a case widely watched by youth sports leagues across the country, the Internal Revenue Service has reached an agreement with the Fairfield United Soccer Association that clarifies the employment status of the group’s coaches, the association’s president said yesterday.
Under the agreement, the Fairfield, Conn., league will begin in 2008 to treat about half of its 30 coaches — those not employed by professional coaching associations — as employees rather than as independent contractors, and will withhold taxes from their pay. And the league will pay $11,600 in back taxes, according to Jay Skelton, the group’s president, a fraction of the $334,441 in taxes and fines the I.R.S. had assessed it in 2004.
“We said we tried to comply with the rules, and we thought we were, but we made mistakes, so we agreed to pay the tax due,†Mr. Skelton said. “For 20 years all of these coaches have been reported as 1099 employees for everybody. If you talk to 100 clubs, I guarantee almost every one, if not all, would declare these guys as independent contractors.â€
“Unfortunately,†he added, “we became the test case.â€
The Fairfield league, with 45 elite teams that travel across Connecticut and beyond for tournaments, trains vigorously with paid college-level coaches. Its budget, raised from player dues, ballooned to $392,000 in 2004, according to tax returns.
It was not the first time the I.R.S. had fined a nonprofit youth sports league, but the proposed penalty was one of the largest, sending worried sports officials in Connecticut and other states scrambling to review the tax code. Mr. Skelton said that over the last two years, about 200 people involved in youth sports had contacted him asking about the resolution of the case. He said the assessment had threatened to put the Fairfield association out of business.
Yesterday, Mr. Skelton said the association’s accountants and advisers had not yet determined whether the league would have to provide medical and retirement benefits for its employees.
“If you hire somebody part time, generally you’re not mandated by law to give them any benefits at all,†said Alan S. Goldberger, a lawyer based in Clifton, N.J., who specializes in sports law.
The group’s referees, many of whom are students, will still be considered independent contractors, and the association will not have to pay withholding taxes for them, Mr. Skelton said. When the league started a decade ago, many of its coaches and referees were parent volunteers; now it pays $2,500 a year to several dozen coaches with serious soccer skills, and $20 to $40 per game for older children to officiate at younger children’s games.
Rob Marvin, a spokesman for the I.R.S., declined to comment yesterday. In an interview last year, another spokesman, Bruce I. Friedland, said that the agency had “an important interest in proper classification of workers†and that groups sometimes intentionally mischaracterized employees as contractors “to avoid paying employment taxes.â€
Generally speaking, if an organization has direct control over a person’s work, he or she should be considered an employee; independent contractors work for a variety of clients, supply their own equipment, and can refuse assignments.
Jim Cosgrove, executive director of the United States Youth Soccer Association, an umbrella group that offered a tax seminar at its national convention last year, said that he had not yet seen the settlement but that it would probably resonate across the nation, where more than three million children play on its teams.
“I certainly think it could have implications for youth soccer and for other youth sports as well,†he said.
Mr. Skelton of the Fairfield association estimated that the new arrangements might increase the average cost for a student to play for a season to $335, from $325.
He said that the association had hired a certified public accountant to work specifically on tax issues, and that he hoped the resolution to the audit would encourage volunteers to return to the association. Some board members had faced the possibility of personal liability for the back taxes and fines, he said.
The group operated this spring with the same number of teams, 45, and players, about 800, but about a tenth of the volunteers, he said.
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