When considering a project requiring paid personnel, carefully review the following information before making a decision. Each PTA project is unique and the applicable state and federal regulations change periodically. The PTA may not hire a voting member of its board as an employee or independent contractor. This would be considered a "conflict of interest." (See California State PTA Bylaws Article IV, Section 7, 344)
Employee vs. Independent Contractor
In many cases it is preferable to pay the schools (rather than an individual) directly for the services required since they have the experience and expertise of an employer. To determine whether a person should be considered an employee or an independent contractor, the IRS has identified twenty factors that are to be used as guidelines.
An individual's desire to be one or the other is not a deciding factor. Serious consequences can occur if a person who is actually an employee is paid as an independent contractor. The unit can be held liable for the individual's taxes that should have been withheld, as well as any applicable penalties. An employer must generally withhold income taxes, withhold and pay social security and Medicare taxes, and pay unemployment taxes on wages paid to an employee. However, an employer generally does not have to withhold or pay any taxes on payments made to independent contractors.
Consider these IRS guidelines. Not every factor is applicable in every situation, and the degree of importance of each factor varies, depending on the type of work and individual circumstances.
1. Instructions. An employee must comply with instructions about when, where and how to work.Even if no instructions are given, the control factor is present if the employer has the right to control how the work results are achieved.
2. Training. An employee may be trained to perform services in a particular manner. Independent contractors ordinarily use their own methods and receive no training from the purchasers of their services.
3. Integration. An employee's services are usually integrated into the business operations because the services are important to the success or continuation of the business. This shows that the employee is subject to direction and control.
4. Services rendered personally. An employee renders services personally. This shows that the employer is interested in the methods as well as the results.
5. Hiring assistants. An employee works for an employer who hires, supervises and pays workers. An independent contractor can hire, super-vise and pay assistants under a contract that requires him or her to provide materials and labor and to be responsible only for the result.
6. Continuing relationship. An employee generally has a continuing relationship with an employer. A continuing relationship may exist even if work is performed at recurring although irregular intervals.
7. Set hours of work. An employee usually has set hours of work established by an employer. An independent contractor generally can set his or her own work hours.
8. Full-time required. An employee may be required to work or be available full time. This indicates control by the employer. An independent contractor can work when and for whom he or she chooses.
9. Work done on premises. An employee usually works on the premises of an employer or works on a route or at a location designated by an employer.
10. Order or sequence set. An employee may be required to perform services in the order of sequence set by an employer. This shows that the employee is subject to direction and control.
11. Reports. An employee may be required to submit reports to an employer. This shows that the employer maintains a degree of control.
12. Payments. An employee is paid by the hour, week or month. An independent contractor is usually paid by the job or on a straight commission.
13. Expenses. An employee's business and travel expenses are generally paid by an employer. This shows that the employee is subject to regulation and control.
14. Tools and materials. An employee is normally furnished with significant tools, materials, and other equipment by an employer.
15. Investment. An independent contractor has a significant investment in the facilities he or she uses in performing services for someone else.
16. Profit or loss. An independent contractor can make a profit or suffer a loss.
17. Works for more than one person or firm. An independent contractor generally is free to provide his or her services to two or more unrelated persons or firms at the same time.
18. Offers service to general public. An independent contractor makes his or her services available to the general public.
19. Right to fire. An employee can be fired by an employer. An independent contractor cannot be fired so long as he or she produces a result that meets the specifications of the contract.
20. Right to quit. An employee can quit his or her job at any time without incurring liability. An independent contractor usually agrees to complete a specific job and is responsible for its satisfactory completion or is legally obligated to make good for failure to complete it.
In questionable cases, the facts will determine whether or not there is an actual employeremployee relationship. If the PTA unit wants the IRS to determine whether a worker is an employee, file Form SS-8, Determination of Employee Work Status for Purposes of Federal Employment Taxes and Income Tax Withholding, with the IRS District Director. The California Chamber of Commerce publishes an excellent guidebook for employers in California, which includes a chapter on the independent contractor issues. In addition, the local office of the California Employment Development Department (EDD) can be contacted for guidelines in making a determination.
Approving Projects That Require Employees
The proposed project must be approved by members at an association meeting. Record the vote in the association minutes. Ongoing projects must be approved every year. Approval must include authorization for the fundraising activities by which the project will be supported. If the project will make use of school facilities, the school principal, the school district superintendent, and the school board must approve it. The respective dates of such approval must be recorded in the minutes of the PTA association with letters of approval attached to those minutes. See the Insurance and Loss Prevention Guide for program criteria.
A key question that must be resolved is whether the project will involve people hired as employees of the PTA or as independent contractors of the PTA. This status will govern how the project is managed and how money is controlled.
The reporting requirements of the federal and state government vary, depending on whether the PTA employs persons as employees or independent contractors. These requirements must be fulfilled, and it is important for the PTA to be sure that they have the means to do so.
Information regarding PTA policies and procedures must be reviewed before embarking on any program or project, especially those where the PTA employs personnel.
Every employee is required to complete IRS Form W-4 and Form I-9, Employment Eligibility Verification, which may be obtained from the U.S. Department of Justice Immigration and Naturalization Services.
All personnel who work on a school campus, regardless of whether they are hired as an employee or an independent contractor, must be finger-printed and must undergo a background check. All personnel employed by the PTA must meet school district health screening requirements. All personnel employed by the PTA must comply with school district procedures for detecting and reporting suspected child abuse, as required by state law.
If an employee is under the age of 18, he/she must have a Work Permit from his/her local school district.
Comprehensive General Liability Insurance
Independent contractors must provide current certificates of insurance, which the PTA must retain in its files. Directors, teachers, or instructors hired as independent contractors must carry their own general liability insurance and Workers' Compensation Insurance (Bonding and Insurance 5.5.3, 232).
Workers' Compensation Insurance
California law mandates that every employer shall establish, implement, and maintain an effective Injury and Illness Prevention Program (Operational Safety Policy for PTA Employees, Forms 395). Any PTA that pays wages directly to an individual and reports said employment on the Workers' Compensation Annual Payroll Report (Forms 399) must comply with this mandate.
Those unit, council, and district PTAs maintaining an office or employees performing at a regular place of business must post an Employee Acknowledgement Form to meet this requirement. The material must be kept current and filed as a part of the permanent record of the association. Each employee must read and sign the Employee Acknowledgement Form in duplicate. The original must be kept as a permanent record, and the copy must be sent to the California State PTA office (Employee Acknowledgement Form, Forms 393).
IN CASE OF EMPLOYEE INJURY
When an employee sustains an injury on the job that requires medical attention, call the district PTA or the California State PTA office at 213.620.1100 to secure an Employer's Report of Occupational Injury or Illness.
The completed report must be returned within 24 hours for processing and referral to the insurance carrier. By law, injuries requiring medical attention must be reported within five working days. A record must be kept on the State Compensation Employee Injury Claim Form Log (Forms 397).
The employee also must be given an Employee's Claim for Workers' Compensation Benefits to complete within one working day of the employer's knowledge of the injury. If the injury does not require medical attention, complete the form and keep it on file, should the employee seek medical attention at a later date.
Workers' Compensation Annual Payroll Report
Each unit, council, and district PTA must file a Workers' Compensation Annual Payroll Report no later than January 31 of each year. This report will cover the period of January 5 through January 4 of the preceding year. If no one was hired, complete all the information requested and write, "No one paid," sign and forward through channels.
Any payments made to an individual must be listed, even if the person was hired for just one hour. Only individuals paid directly by PTA are considered employees of the PTA and, as employees, must be listed by name of individual worker, type of work performed, dates worked, amount paid, and whether this person has his/her own Workers' Compensation insurance on the Workers' Compensation Annual Payroll Report (Forms 399). If the PTA does not pay the worker directly but donates the money to the school, do not list the worker.
For more information on Workers' Compensation Insurance, please review Bonding and Insurance (5.5.3, 232) and Insurance and Loss Prevention Guide.
Employer Tax and Withholding Requirements
If an employer-employee relationship exists, the PTA, as employer,must comply with the following:
FICA: The PTA must withhold from each employee's wages the proper social security and Medicare amounts, paying to the federal government that sum on behalf of each employee. As employer, PTA is required to pay a matching sum as well. The amounts that an employer must withhold from each employee and contribute are listed in the IRS Publication 15, Circular E, Employer's Tax Guide.
Federal and State Income Tax: The PTA must administer, collect, account for, and pay to the federal and state governments specified amounts of taxes that must be withheld from each employee's wages. This process requires PTA to obtain W-4 statements from each employee. (Federal Tax withholding schedules: IRS Publication 15. State Tax withholding schedules: Circular E, Employer's Tax Guide, and California Employer's Tax Guide are available from the California Employment Development Department.)
SDI (State Disability Insurance): The PTA must withhold and pay state disability insurance, including California paid Family Leave Program withholding. Rates are found in the California Employer's Tax Guide.
SUI (State Unemployment Insurance) and ETT (Employment Training Tax): The PTA must pay state unemployment insurance and employment training tax. Rates are found in the California Employer's Tax Guide. Semi-weekly, monthly, or quarterly payment of withholding to the IRS and California Employment Development Department (EDD) are required. For further information, consult IRS Publication 15, Circular E, Employer's Tax Guide, Publication 509, Tax Calendars and the California Employer's Tax Guide, Employer's Guide to Unemployment Insurance Code of California, available from the California EDD.
Form W-2: This form must be completed by the employer and issued annually to every employee before January 31. The Form W-2 may be downloaded from www.irs.gov. Each employee should complete a Request for Taxpayer Identification Number Form (Forms 415).
Filing Requirements for Employers
If the PTA is an employer, it must follow rules set up by the IRS, Social Security Administration, and the California EDD.
Failure by an employer to pay taxes due or to withhold required amounts from an employee's wages can result in substantial penalties to the employer. Refer to the current IRS Publication 15, Circular E, Employer's Tax Guide and the current California Employer's Tax Guide for detailed information regarding penalties.
Penalties may apply if the PTA:
Penalties may apply for each whole or part month if IRS Form 941, Employer's Quarterly Federal Tax Return is not filed when required, disregarding any extensions of the filing deadline.
The PTA may make advance Earned Income Credit (EIC) payments to employees that submit IRS Form W-5. If the PTA does not do this, it is subject to a penalty equal to the amount of the advance EIC payments not made.
A penalty may be imposed if the PTA fails to file (on paper or on electronic media) an Information Return (IRS Forms W-2 and 1099- MISC) or files with incorrect information. A PTA that fails to withhold or pay over any tax withheld is guilty of a misdemeanor and the responsible party(ies) may be imprisoned and/or fined.
Employer Identification Number (EIN)
PTAs may not use any individual's social security number or the Employer Identification Number (EIN) of another organization. No other organization or entity may use the PTA's EIN.
The EIN is listed in the Bylaws as well as on the IRS Form 990/990EZ. If no number can be found, check with the council and PTA district PTA treasurer. The district may call the State PTA office to obtain the number or ask for further assistance. The California State PTA will contact the IRS, if necessary, to obtain the EIN.
The district PTAs, under the authority of the California State PTA, are responsible for filing IRS Form SS-4 to obtain the EIN for new units.
Filing Requirements for Independent Contractors
Payments of $600 or more during a calendar year made to individuals for services rendered, who are not employees, must be reported on the IRS Form 1099-MISC. This report is due to the IRS by February 28, for payments made during the previous calendar year. Refer to Employee vs. Independent Contractor (5.6.1, 235) for assistance.
PTA must report individuals who are independent contractors to the California EDD on Form DE 542, Report of Independent Contractor(s), within 20 days of making payments of or entering into a contract for $600 or more within any calendar year.
Currently, EDD may assess a penalty of $24 for each failure to comply with the required time frames. A penalty of $490 per instance may be assessed for failure to report independent contractor information. To obtain Form DE 542 visit EDD website at www.edd.ca.gov.
Each independent contractor should complete a Request for Taxpayer Identification Number Form (Forms 415).
PTA as an Employer
Tax Filing Support Center
Handling Requests for Relief Assistance
Frequently Asked Questions
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