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LEO off-duty 1099 vs W2

Old 02-07-2018, 07:13 PM
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Default LEO off-duty 1099 vs W2

Tax time again and I have a question for THT brain trust.

As a deputy employed by the county, I work off-duty details pretty frequently. Some of this off-duty work is actually paid for by the county. The check is written from the county and not the actual Sheriffs Office. Hence, the check is not part of my salary, not OT, not part of my retirement, etc. These specific details are for working in the county park, county building and/or the county library.

My question is should these details, where I am getting paid by the county for which I am employed, be giving us a W2 or a 1099? We do not pay any taxes on these details until the end of the year.

I understand why I receive a 1099 for off-duty work where I am working for a completely different employer. But I am still on the fence as to why the county worked details should be a 1099 vs W2.

What says THT?
Old 02-07-2018, 07:21 PM
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Go to the FOP or PBA and find out. They know the answers and will be knowledgable.
Old 02-07-2018, 07:24 PM
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Sounds sketchy on the part of the county. The IRS for years has been cracking down on Main Street for trying to co-mingle employee vs independent contractor due to lack of payroll tax participation.
If you work for the county as an employee and they say go right as an employee but go left as “self employed”, something is not kosher

Last edited by STEELA; 02-07-2018 at 07:30 PM.
Old 02-07-2018, 07:25 PM
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Originally Posted by STEELA View Post
Sounds sketchy on the part of the county. The IRS for years has been cracking down on Main Street for trying to co-mingle employee vs independent contractor due to lack of payroll tax participation.
If you work for the county as an employee and they so go right as an employee but go left as “self employed”, something is not kosher
I agree sounds funky..
Old 02-07-2018, 07:34 PM
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Funky for sure.. Another thing I'd strongly suggest you should ask is this. Should something happen when working under a 1099 setting just who is going to be financially responsible for picking up the tab. 1099 employees are not covered by workman's comp.
Old 02-07-2018, 07:41 PM
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I’ll say this though. If you’re getting a 1099 you are now as self employed in all respects as if you owned a restaurant. Make sure you file a schedule C for that gross income and expense EVERYTHING legitimately you incurred during that specific task.
That mean % of use for car, ins meals, depreciation, etc. They may be doing you a favor. I assume you don’t have an accountant?
Old 02-07-2018, 07:41 PM
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Originally Posted by Bamby View Post
Funky for sure.. Another thing I'd strongly suggest you should ask is this. Should something happen when working under a 1099 setting just who is going to be financially responsible for picking up the tab. 1099 employees are not covered by workman's comp.
From my understanding if you have to exercise LE duties while on an off duty job, you are now back working for your LE employer and workers comp now comes into play..
Old 02-07-2018, 07:45 PM
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Originally Posted by STEELA View Post
I’ll say this though. If you’re getting a 1099 you are now as self employed in all respects as if you owned a restaurant. Make sure you file a schedule C for that gross income and expense EVERYTHING legitimately you incurred during that specific task.
That mean % of use for car, ins meals, depreciation, etc. They may be doing you a favor. I assume you don’t have an accountant?
Yes, you can deduct ammo, some guns, mileage on ANY vehicles (other than department supplied). You can deduct a small inside the house office space, park8ng for your police car on your property..A lot of deduction but I have a tax guy..
Old 02-07-2018, 07:49 PM
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Originally Posted by Cracker View Post
Go to the FOP or PBA and find out. They know the answers and will be knowledgable.
This would be my next step if I needed. However, I am just inquiring at this time. I am not an expert with taxes by any means but this has been a question in my mind every year at tax season.

I gave it the idea that maybe this was worked out in our contract. But then I keep telling myself this is a federal tax law which the contract can’t go around?
Old 02-07-2018, 07:54 PM
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Originally Posted by STEELA View Post
I’ll say this though. If you’re getting a 1099 you are now as self employed in all respects as if you owned a restaurant. Make sure you file a schedule C for that gross income and expense EVERYTHING legitimately you incurred during that specific task.
That mean % of use for car, ins meals, depreciation, etc. They may be doing you a favor. I assume you don’t have an accountant?
I realize there may be a limited amount of decudtions which could assist me. Limited because they (department) supply us with pretty much everything we need; car is theirs, gas is theirs, all the equipment I wear is theirs (for the most part).

However, I would love for this pay to be taxed already that way I do not have to worry about it at tax time. One of those grass is always greener on the other side type of things. Just wanted to throw it out there and see what others who might have more knowledge in this area might think.
Old 02-07-2018, 08:10 PM
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Originally Posted by seacraft06 View Post
I realize there may be a limited amount of decudtions which could assist me. Limited because they (department) supply us with pretty much everything we need; car is theirs, gas is theirs, all the equipment I wear is theirs (for the most part).

However, I would love for this pay to be taxed already that way I do not have to worry about it at tax time. One of those grass is always greener on the other side type of things. Just wanted to throw it out there and see what others who might have more knowledge in this area might think.
I get it. I was in the same boat decades ago where employer paid me w2 for my Underwriting functions and 1099 for biz development. They got hammered and I initially had a pretty big tax liability. Do they buy you meals while on detail? Do they require you to answer your phone for the 1099 function while at home? Do they pay for the dry cleaning of your uniforms as a result of that activity?
You get where I’m going. Not sure what the NUT is in terms of income vs tax liability but suggest you pay an accountant to review. Might be a couple hundred for it and I betcha some of your partners do.
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Old 02-07-2018, 08:20 PM
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Found this. Long but VERY informative
Long too
——————————



TOPICS
Individual Income Taxation
Employment Taxes
Editor: Valrie Chambers, Ph.D., CPA

Employment Taxes
The applicability of self-employment tax to amounts paid to off-duty police officers continues to create questions for CPAs. A recent example is a Tax Court decision from December (Specks, T.C. Memo. 2012-343). A number of cases and some older revenue rulings provide valuable insight into the factors that determine whether the off-duty officer is performing services as an employee or independent contractor and, if deemed an employee, which entity is the employer—the police department or the third-party entity.

Carnell Specks was employed as a police officer for the Houston Police Department (HPD) and worked almost 2,200 hours for HPD during 2008. He also provided security services for several third-party businesses during off-duty hours. While providing security services to these third parties, Specks wore an HPD uniform and carried his personal firearm. The third parties did not train, supply, or equip Specks, and his relationship with each of the third parties was at-will. Further, each third party paid Specks directly on an hourly basis and did not withhold employment taxes or provide any fringe benefits. Specks’s compensation from the third parties was reported on Forms 1099-MISC, Miscellaneous Income.

At trial, Specks contended that he was an employee of the third parties and thus amounts paid to him were not subject to self-employment tax (initially the taxpayer treated the amounts received as additional compensation as an HPD officer). A tax is imposed on a taxpayer’s self-employment income (Sec. 1401); however, self-employment tax does not apply to compensation paid to an employee (Sec. 1402(c)(2)).

Whether an individual is an employee or an independent contractor is a question of fact determined by applying common law principles. Relevant factors include (1) the degree of control exercised by the principal over the details of the work, (2) which party invests in the facilities (equipment) used in the work, (3) the individual’s opportunity for profit and loss, (4) whether the principal has the right to discharge the individual, (5) whether the work is part of the principal’s regular business, (6) the permanency of the relationship, and (7) the relationship the parties believed they created (see, e.g., Weber, 103 T.C. 378 (1994), aff’d, 60 F.3d 1104 (4th Cir. 1995); and Rosato, T.C. Memo. 2010-39).

The court recognized that the relationship between Specks and the third parties had some aspects that are characteristic of an employer-employee relationship and others of a principal-independent contractor relationship. After weighing the above factors, giving greater weight to the third parties’ right to control Specks’s performance of his duties, the court concluded that Specks failed to prove that he was as an employee. Therefore, the amounts he received from the third parties were subject to self-employment tax.

A common procedure among many municipalities that allow their police officers to provide off-duty services to third parties is that the department approves the services in advance, and a “scheduler” or “coordinator” within the department serves as a liaison between the department and the third parties. Courts have ruled an independent contractor relationship exists between the police officer and third party in instances where the department sets the minimum off-duty pay rates; limits the maximum hours of off-duty work; and requires the officers to monitor their police radio while providing the services and to be subject to recall to regular duty (see Ladue, T.C. Summ. 2011-41; Cicciari, T.C. Memo. 2003-179; and Milian, T.C. Memo. 1999-366).

In the above cases, the Tax Court concluded that the off-duty services were performed for and were directly beneficial to the third-party entity. Any benefit the police department received from an increased police presence at the officers’ off-duty assignments is incidental and similar to the benefit to a police department when officers increase their presence in a community by driving their police cruisers home. Another factor considered is the ability to select and discharge at will. The approval to work off-duty projects and the ability to suspend the officer if department policies are not adhered to are not the same as the ability to hire and fire with regard to the off-duty positions; rather, they amount to incidental control. As the Tax Court found in Ladue, the police department is looking after its own interests in making sure that off-duty work does not interfere with on-duty employment, that the department’s image is not tarnished, and that the department knows where its officers are in case of an emergency.

Another important factor in these cases is the source and method of payment for the off-duty services. In the above cases, the third parties paid the officers directly and treated them as independent contractors, issuing Forms 1099-MISC.

A pair of revenue rulings issued in the 1970s contrast with the recent court rulings and suggest that, in the past several decades, municipalities have modified their practices in their involvement in the employment of off-duty police officers by third parties, to help ensure the municipalities are not deemed to be employing the officers when the officers work for third parties. The first ruling is Rev. Rul. 70-504, in which a municipality granted a license to an amusement company to operate a theater. The license required the theater to have an officer stationed at the theater and pay the officer remuneration at a rate equal to the rate of pay the officer received from the municipality. In addition, the officer worked directly under the police captain while at the theater and was subject exclusively to the captain’s direction and control. Further, the theater did not have any input on which officers were assigned to the theater. The IRS determined that the police officers were employees of the municipality.

Several years later, the IRS ruled that the off-duty police officers who volunteered for assignments to direct traffic at a local bank drive-in facility were employees of the city for employment tax purposes. In Rev. Rul. 74-162, a bank and the police department entered into an arrangement under which two off-duty police officers would report to the bank each day it was open to direct traffic. Each officer would work a four-hour shift, and the department would assign only officers who expressed an interest in such traffic control services. The assignments were made by two members of the police department who were designated by the department as the off-duty work coordinators. The bank had no voice in selecting the officers assigned to work there, did not negotiate with the individual officers, and did not tell them how to perform their duties. The remuneration the officers received for the traffic control assignments was established by the city council and collected by the police department. The police department coordinators authorized the payment of the additional pay to the officers for their off-duty services. The court ruled the police officers’ compensation for these assignments was as employees of the city, not the third party.

These two early revenue rulings contrast with the more recent court decisions on payments police officers receive from off-duty jobs with third parties and may explain why the IRS is increasingly pursuing self-employment taxes in these situations. While a municipality will usually monitor and coordinate the off-duty assignments and require the officers to adhere to the police department’s policies, the courts have recently ruled this level of control by the municipality is incidental. Further, when the factors distinguishing an independent contractor relationship outweigh the factors suggesting an employee-employer relationship, the courts have consistently ruled the amounts received by the police officer are considered self-employment income, subject to self-employment tax.
Old 02-07-2018, 08:39 PM
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I was actually the commander of the off-duty office for many years. This was always an issue and a question that was brought up. They were actually people who handled it differently but I will tell you what I did. Anything that came to me in a 1099 was done on a schedule C. From there where the deductions that I was entitled to. Everything that I used for that off-duty job was a deduction. The remaining amount was my net income and from there I did have to pay the self-employment tax on that. There are many that would say that that is not the way there is really no Clarity on the situation even from the IRS. I opted to ensure that Uncle Sam would not come after me if audited. I know that I probably paid more than I had to but I felt comfortable doing so.
Old 02-08-2018, 06:03 AM
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Originally Posted by seacraft06 View Post
Tax time again and I have a question for THT brain trust.

As a deputy employed by the county, I work off-duty details pretty frequently. Some of this off-duty work is actually paid for by the county. The check is written from the county and not the actual Sheriffs Office. Hence, the check is not part of my salary, not OT, not part of my retirement, etc. These specific details are for working in the county park, county building and/or the county library.

My question is should these details, where I am getting paid by the county for which I am employed, be giving us a W2 or a 1099? We do not pay any taxes on these details until the end of the year.

I understand why I receive a 1099 for off-duty work where I am working for a completely different employer. But I am still on the fence as to why the county worked details should be a 1099 vs W2.

What says THT?
If you were in the private sector it would be regular income; you would pay taxes and it would be on your W-2, if you were working for the same entity. But states have different rules for public sector entities; you need to ask your HR department. But either way you will pay the same taxes in the end. Look at your effective tax rate on your regular pay and set aside that amount to pay the taxes due with your return. You also have the option of paying quarterly estimated taxes but unless we're talking a ton of taxes it's not required and simpler to just put it aside.
Old 02-08-2018, 07:12 AM
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Originally Posted by seacraft06 View Post
T These specific details are for working in the county park, county building and/or the county library.
I'm not busting your chops or anything, but public libraries need armed guards present??? Wow now that's not Baghdad but that certainly isn't no Mayberry either.
Old 02-08-2018, 08:14 AM
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IF y'all paid by the county it SHOULD BE W2, in fact our county had that same practice years ago and got busted by IRS .

Pretty much considered a NO NO to give a W2 AND a 1099 non employee comp


If I am correct even if our local city and county cops work extra duty it ALL runs through either County Sheriffs Dept or City Police Department. I think issue was w comp and liability as well



Originally Posted by triplejs View Post
. Anything that came to me in a 1099 was done on a schedule C. From there where the deductions that I was entitled to. Everything that I used for that off-duty job was a deduction. The remaining amount was my net income and from there I did have to pay the self-employment tax on that. There are many that would say that that is not the way there is really no Clarity on the situation even from the IRS. I opted to ensure that Uncle Sam would not come after me if audited. I know that I probably paid more than I had to but I felt comfortable doing so.
From what I saw there was NEVER ANYTHING to deduct, in our area they drove the county/city cars and wore county/city uniform.

Last edited by tprice; 02-08-2018 at 08:20 AM.
Old 02-08-2018, 08:24 AM
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Originally Posted by tprice View Post
Pretty much considered a NO NO to give a W2 AND a 1099 non employee comp
That's 100% false. Unless of course this only exists in the LEO realm. I was W2 and 1099 for years. It may be a no-no for LEOs but in the realm of legality, does exist and is in fact legal

I'm not an accountant, but have a bit of experience in this.

What TripleJ's said is right. One advantages of 1099 is the write off.

Pros:

You can write off miles on your car
Gas expenses
Out of pocket training
Hard equipment (purchase of a firearm, any other hard goods, NOT uniform...as far as i know)

Those just name a few.

Cons:

The work involved tracking this crap.
Self-employment tax (like TripleJ's said)

You're going to be SOL if you're using a squad car, they're paying for your gas, and you have no expenses. You don't own those assets so you can't write them off.

If you have nothing to write off that 1099 income gets slapped right on to your AGI.
Old 02-08-2018, 08:25 AM
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Originally Posted by tprice View Post
IF y'all paid by the county it SHOULD BE W2, in fact our county had that same practice years ago and got busted by IRS .

Pretty much considered a NO NO to give a W2 AND a 1099 non employee comp


If I am correct even if our local city and county cops work extra duty it ALL runs through either County Sheriffs Dept or City Police Department. I think issue was w comp and liability as well





From what I saw there was NEVER ANYTHING to deduct, in our area they drove the county/city cars and wore county/city uniform.
I agree with this. I do returns for LEOs and they get W2s for the side work. I don't recall seeing 1099s. The self employment tax plus Fed and State would not make it worthwhile to do for me if I were a cop.

Seems like a sure loser if the same county pays the same employee on both a W2 and a 1099, but who knows. Maybe there is some tax case that supports it.
Old 02-08-2018, 08:25 AM
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Originally Posted by tprice View Post
From what I saw there was NEVER ANYTHING to deduct, in our area they drove the county/city cars and wore county/city uniform.
And that would be the problem.

Also, not sure how it works in other states but 1099 income i don't believe would count for purposes of pension. That would be a big problem here in NJ.
Old 02-08-2018, 08:26 AM
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Originally Posted by GWcpa View Post
Maybe there is some tax case that supports it.
If you felt intrepid enough you could setup an LLC and tax advantage of the pass through tax rate.

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