Income for Sports Officials
The Difference Between Employee and
Independent Contractors, and the Tax Implications
If you are being paid as an employee, your income includes amounts received for services rendered. Employers treat this as wages and those wages are subject to income tax withholding, Social Security and Medicare withholding. It is reported to you on Form W-2 by January 31 for the preceding calendar year.
If your employer is reimbursing you for expenses, they may report them to you one of two ways:
One, if your employer is reimbursing your expenses dollar for dollar, any reporting to you by your employer is for information only. The amount is not subject to income tax, Social Security or Medicare tax. You are not required to report those reimbursements as income nor are you allowed a deduction for the expenses. Those amounts offset each other and are not reported on your tax return. This treatment is beneficial in that the expenses are not subjected to the 2% of adjusted gross income floor on Schedule A.
Two, if you do not report to your employer your expenses and instead receive amounts to help offset your various expenses (i.e. an expense allowance), your employer will include the reimbursements in your Form W-2. Your expenses are reported on Form 2106, Employee Business Expenses, and are subject to the 2% AGI floor on Schedule A. The reimbursement is subject to income tax withholding, Social Security and Medicare tax withholding. If your employer pays for your expenses directly, for example, gives you a plane ticket or hotel reservations paid in advance, these items are not income to you unless you negotiate these items for cash and a lesser service. Trading a first class airline ticket for a coach or business class ticket (one of lesser value) and “pocketing” the difference is not illegal. However, you must report the difference (savings) as income.
If you are being treated as an independent contractor, your income from officiating includes all amounts received regardless of whether you report your expenses to the contracting agent. You will report all receipts on Schedule C, Profit or Loss from Business Activity. Types of income you might receive include a flat fee for officiating a game, reimbursement for some or all of your deductible or nondeductible mileage and amounts for out-of-town expenses like hotel and meals.
See Samples of Schedule C and Form 2106
Read About Income for Sports Officiating from a Tax Perspective.