SLS represented a soccer club in an IRS audit and appeal of the resulting audit findings on the issue of whether coaches were employees, independent contractors or non-employees.

Based on its audit, the IRS found that individuals providing coaching services, i.e., coaches, to soccer players at a soccer club were employees of the soccer club for employment tax purposes. Consequently, the IRS proposed assessing substantial employment tax and penalties against the soccer club for several years of its payments to the coaches.

The soccer club maintained that coaches were either (i) independent contractors of the soccer club, or (ii) ‘non-employees’ under Section 530 of the Revenue Act of 1978 and accordingly, under either of the foregoing positions, the soccer club was not liable for taxes on payments to coaches. The IRS rejected these positions during the audit.

Section 530 is a safe harbor provision that prevents the IRS from reclassifying “independent contractors” as employees and imposing federal employment tax, penalty and interest on the payor, for such misclassification. Qualifying for Section 530 relief requires that a payor, here the soccer club, meet certain substantive consistency, reporting consistency and industry standard tests.

The soccer club, represented by SLS attorney and CPA Daniel Runion, appealed the IRS’s finding and proposed assessment of employment tax and penalties. After the appeal, the IRS conceded its position admitting that the coaches were non-employees under Section 530. This resulted in the soccer club not being subject to substantial taxes and penalties on its payments to coaches.

If you would like to discuss tax litigation or tax planning needs please contact Daniel Runion, JD, CPA, at 816-931-0500.