Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 01-21-2010, 09:53 AM
Junior Member
 
Join Date: Jan 2010
Posts: 2
Stipend for service

I am the administrator of a not-for-profit private school and our school librarian (volunteer) is paid a small stipend for operating the school library during scheduled student visit time. The stipend is a minimal amount and is given to the volunteer school librarian to assist in her paying for her son's school tuition. This amount is paid through our payroll system and is paid without anything taken out for taxes etc. At the end of the year the librarian is given a 1099 to declare the income from this stipend. The amount of the stipend is equal to or a little more than the cost of your son's total school expense. My question is... Are we (the school) violating any tax laws that would prevent us from paying our volunteer librarian this stipend? I know our HR department maintains the same required information on this person as they do on any other employee but we consider the librarian a volunteer that receives a stipend for helping at the school.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 01-21-2010, 10:19 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,400
Blog Entries: 3
Well, it seems that you are considering the librarian as an independent contractor and hence you are paying her a 1099-Misc for an amount that is a small stipend! Clearly, it seems that you have complied with the reporting of this income to the IRS in the form of a 1099-Misc, but, your question is more towards the legality of reporting her in this manner as opposed to including her income on the W-2.

There are elements of the librarians work that would help classify her as an independent contractor and these would support your case to consider her as a 1099-Misc contractor. But, clearly, there are some elements of the librarians working for your organization that would not support your case. However, if the amount happens to be a small stipend as you say, I would not be overly concerned in 2009.

But, to be safe please review the following link below to determine whether or not you can satisfy the IRS litmus test for classifying your employee(librarian) as an outside contractor/independent contractor. If it seems that you do not meet the tests, in 2010 I would report her income as a W-2 employee, the reason being that the IRS is getting very strict in this area and scrutinizing a lot of companies that are reporting employees incorrectly as 1099-Misc income. The consequences is of incorrectly reporting employees is potential penalties and interest related to not paying the payroll taxes applicable to the income reported on the 1099-Misc on a timely basis.

Will your employee's status as an outside contractor pass the IRS litmus test?

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 01-21-2010, 09:15 PM
Junior Member
 
Join Date: Jan 2010
Posts: 2
Stipend Questions Continued

Okay based on the IRS litmus test, I would say that this volunteer librarian should be receiving her stipend as a W-2 employee verses a 1099-Misc. This employee (volunteer) puts in time in the library over and above the hours required of her. The stipend (W-2 reported) covers only a small percentage of the time spent helping run the library. So my question looks like this:
If the librarian puts in time both for pay and as a volunteer and receives a paycheck twice a month (@$250.00 per pay period) for the months of September - June (grand total payroll of $5000.00) and the work hours require her to be in the library when the students visit (2 to 3 hours per day), will we be violating any tax laws or minimum pay requirements?

And thanks for the info!



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply


Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Do I take deduction in year of service or year paid egmacrae Medical 0 01-17-2010 02:00 PM
Federal and State Taxes applicable for trainee taken on stipend basis sameer1968 Miscellaneous 0 12-30-2009 12:08 AM
can an LLC own C Corp Stock to prevent being labeled at Personal Service ? brndwgnr C-Corporation 0 07-06-2008 02:28 AM
Should stipend be included in taxable income? evil_neo Income 1 02-12-2008 09:57 AM
What are Personal Service Corporations? TaxGuru C-Corporation 0 12-09-2007 04:09 PM

Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning