The IRS is considering some proposals that could significantly add to the paperwork and record keeping overhead of youth soccer leagues (most of which are non-profit corporations). According to a recent article a CNN/Money, the IRS is hoping to increase it’s collection rate from businesses. However, the proposals will require many more 1099s to be filled out and unfortunately won’t have the financial impact on collection rates that would justify them.
Possible changes in the tax law would require:
- Filling out 1099s for service/corporate contractors – things like field maintenance (TruGreen, etc), bookkeeping (how ironic), online registration services, etc. The $600 threshold would still apply, but many leagues pay corporate and service contractors $600 or more per year.
- Validating all Tax ID numbers of independent contractors with the IRS. Referees, paid trainers, etc.
- Require the withholding of taxes for any independent contractor that requests it.
These could have a significant impact in record keeping for larger leagues and will just be more paperwork for the smaller ones (we were happy to only have to file three 1099’s last year, though we expect that number to go higher this year).
Clearly there is a problem:
IRS data show that independent contractors report 96 percent of the income for which they get information returns (Form 1099, for example), but only 46 percent of income for which they don’t.
The billion dollar question is does that shortfall result primarily from income under the $600 threshold or the lack of documentation for service contractor payments? Unfortunately, only time will tell and we’ll all be doing more paperwork to find out.