Discussion:Police Self-Employment Exempt?

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Discussion Forum Index --> Tax Questions --> Police Self-Employment Exempt?

Lifeandtaxes (talk|edits) said:

9 April 2006

Police officer earns off-duty income as traffic control. Since his regular earnings aren't subject to social security, are his s/e earnings in this line of work exempt?

Warren (talk|edits) said:

9 April 2006
I would say that if it is 1099 nonemployee compensation then they are subject to self employement tax even though his on duty pay is not.

Taxea (talk|edits) said:

10 April 2006
Is he sanctioned by the department? Does he have to wear his uniform and use a patrol car? Who pays the "overtime"...is it included in his wages from the department or is he paid by 1099?

How often does he do this? As retired law enforcement my experience says that he cannot do this type of work without department approval and in that case some departments take the pay and include it in salary as "special assignment" others make all the arrangements and the hiring company pays the officer directly then issues either a 1099misc or a W-2. If included in W-2 it and 2106 for expenses. If it isn't done consistantly and with regularity I put it on Line 21. If the department sanctions the work I use a 2106 for the expenses. If it is done without department knowledge or sanction then it is Sch C and subject to SE

Dcyr (talk|edits) said:

1 November 2006
Are you aware of any court cases or revenue rulings regarding this issue?

Bbla (talk|edits) said:

2 November 2006
I recently represented a city police officer in a IRS audit. Issue - Form 1099 income or W-2 income - both subject to FICA tax.

(1) bank security guard - bank issued a form 1099: (2) Movie theatre - theatre issued a W-2: (3) Security on Metro Buses - Metro issued a W-2. Police officer reported all income as W-2 income. Our argument,at audit, was that the bank should have issued a W-2, not a form 1099. We argued that there is no real difference between working as a security officer at the theatre, bus or the bank. IRS agreed, but did require the officer to pay his part of the FICA (7.65%) on the form 1099 income. I asked the IRS if they would go after the bank for the other half. The auditor was not sure what they would do concerning the add'l FICA tax due. All the off-duty work discribed above is W-2 work, not form 1099 and not subject to self-employment tax.

94nole (talk|edits) said:

15 February 2008
I am warming up and old issue.

We have a letter from the service that determines that, with regard to SE tax, the officer is liable only for his/her half of the medicare tax. The pay is subject to federal income tax. It is NOT subject to Social Security AS LONG AS the department is assigning the officer to the secondary assignment.

Our local sherriff's office, as I would assume most sherriff's offices, has a central booking department for those looking for off-duty police officers. Therefore the department assigns the officers who are looking for off-duty pay and are obviously available to do so.

Here is my dilema...I used to be able to put it through on 4137 straight from the 1099-MISC. The software is trying to make me use the 8919 but none of the categories fit and I sure as heck do not want to file and SS-8.

Any ideas? I can certainly override but that is a 4 letter word here in the office but I may have no other choice.

Death&Taxes (talk|edits) said:

15 February 2008
8 letters, Nole.

Attach a disclosure? Seems to me you certainly have substantial documentation.

Taxea (talk|edits) said:

15 February 2008
it may not be subject to social security if assigned by the department, however some department's pay for this special duty work directly. For those who get 1099's off of a department assignment it is a line 21 item and wouldn't it be in the officer's favor to raise his social security benefits, when the time comes, by paying his share now? Some officers I know match their regular income with special duty overtime pay! He would be losing half his benefit income by not using a Sch C or line 21. taxea

Genskitty (talk|edits) said:

June 3, 2009
So, let me get this straight.

1.) If the police officer is assigned by the department and paid by the department for detail work then it is not subject to SE tax. Therefore it goes on Line 21.

2.) Whether or not the police officer is assigned by the department but is paid by the employer who hired him to perform the detail work, then it goes on Sch. C, Subject to SE tax.

Did I understand this correctly?

SCCPA (talk|edits) said:

3 June 2009
It takes a little more than merely being "assigned" by the Department to avoid self-employment tax. See See INFO 2002-0187 from IRS's Office of Chief Counsel at http://www.irs.gov/pub/irs-wd/02-0187.pdf . It discusses several cases including Kaiser v. Comm., TC Memo 1996-526 which holds in part a police officer who provided security, traffic control, and other police-type services for private companies was subject to self-employment taxes on amounts he earned for the off-duty jobs. The court held that although the police department required the officers to abide by a code of conduct and required that any outside employment be approved in advance, the department was not the officer’s employer with respect to the income earned off-duty because the broad control exerted over off-duty activities was different from the direct control found in a common law employer-employee relationship.

Tkelly911 (talk|edits) said:

3 June 2009
The test for exclusion from FICA is based upon the legal status of the employer regarding participation in the Social Security system. The IRS position is that if the municipality employing the officer in his or her regular capacity also "employs" the officer in the "off duty" capacity, and that employer is exempt (not all are) then the employee is exempt. If the facts and circumstances show the employer is other than the municipality, then all normal taxes will apply.

Shelly1016 (talk|edits) said:

13 November 2009
Aside from the cases listed in INFO 2002-0187 referenced above, does anyone know of a recent court case or rev ruling addressing when police detail income is not considered self-employment? I have read the above discussion and understand/agree with the exclusion of withholding social security for participation in a state retirement plan.

I am a tax preparer married to a police officer. We have for years claimed the police detail income reported on form 1099 on line 21 with no problem. In year 2000, I actually asked the IRS for guidance and received none to date. Our 2007 return came under random audit and the IRS requested a clarification of the type of income on line 21. I provided an explanation and a copy of a letter from Jefferson Parish referencing Whiters vs. IRS in New Orleans 1990. Though other officers from my husband's department have successfully attached this as support for their line 21 income in the past, suddenly the IRS is disallowing use of this letter as evidence. Any direction is helpful.

R2 (talk|edits) said:

14 November 2009
T.C. Memo. 2003-179 ruled that such income is subject to SE tax.

Tkelly911 (talk|edits) said:

14 November 2009
This is another myth. Because they are so tight knit, police officers often exhibit a herd mentality where taxes are concerned. This myth ranks up there with excluding a percentage of a workers comp award from regular (not disability) income and deducting on-duty meals. There is simply no legal authority for self employed individuals in this capacity to be excluded from SE tax, as noted by the Tax Court in the citable, precedent setting Tax Court memo mentioned by Riley.

Jake (talk|edits) said:

10 April 2011
Perhaps the treatment of off-duty police services reported as as 1099-Misc independent contractor "non-employee compensation" is one of those examples of an exception for "industry practice". In my experience this has been the practice for off duty police at least in in Ohio for decades. I have heard, but have no documentation (except for a report of an audit that did not raise the issue) that the employment of cleaning service workers is in that category, as well as courier delivery drivers.

Taxea (talk|edits) said:

29 February 2012
In the case of Honolulu Police Department..they have a letter ruling from the IRS that says in part that the income from any special duty assignment (in uniform and sanctioned by the Department) is the same as working for the department and is not subject to SE because HPD wages are not subject to SE.

I think that any department that does not deduct SE from the officer's regular duty wages needs to have this type of ruling from the IRS before the officer would be able to claim "special/off-duty wages" as not subject to SE.

TAXTIME49 (talk|edits) said:

25 October 2012
Taxea, where could I get a copy of the Honolulu Police Dept letter ruling from the IRS?

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