In a landmark case for youth sports programs, the Internal Revenue Service has settled its case about whether a league’s paid coaches were independent contractors or employees subject to withholding taxes.
The agreement might mean higher costs for youth sports programs that pay some coaches.
In the settlement, the IRS agreed to accept $11,600 in back taxes from the Fairfield United Soccer Association – a fraction of the $334,441 in taxes and fines the agency had assessed against the association in 2004. In return, the Connecticut league’s 45 elite traveling teams have agreed to withhold taxes from the $2,500 annual paychecks of about half of the “several dozen coaches with serious soccer skills,” according to The New York Times. Those already employed by professional coaching associations will not have taxes withheld from the fees paid by the association.
“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,” league President Jay Skelton told the Times.
He said the assessment had threatened to put the association out of business.
Although the IRS has fined other youth sports teams, the size of Fairfield’s penalty has similar programs across the country consulting their tax attorneys.
That’s what they should be doing, according to a position paper on “Independent Contract Labor” posted on the website of the United States Youth Soccer Association, a nonprofit association representing the leagues and teams of 3 million club-level players, ages 5 to 19.
Citing definitions for independent contractors established by Section 530 of the Revenue Act of 1978, the national association advises its leagues and teams to have written contracts with paid staff, to have those contracts reviewed by a local business attorney or the national association itself, and to exchange W-9 and 1099-MISC forms with each paid staff member, including those paid less than $600 and those paid in cash.
“The professionalization of youth sports continues,” Jim Cosgrove, executive director of the national association, told the Times. “It’s going to increase costs.”
According to Skelton, those costs may translate into a $10 fee increase for the Fairfield association’s 800 youth players, from $325 to $335 per season.