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 payment for services rendered. Employers treat this as wages and these wages are subject to income tax withholding, Social Security and Medicare tax withholding. Wages are 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:
First, 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.
Second, 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 as income on your Form W-2. In order to deduct your expenses you would need to complete Form 2106 (or 2106- EZ), Employee Business Expenses. Those deductions are subject to a minimum of 2% of Adjusted Gross Income (AGI) floor on Schedule A. If your employer pays for your expenses directly, for example, gives you a plane ticket or hotel reservations paid in advance, those items are not income to you unless you negotiate the 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 report your income 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. 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 (per diem).