Discussion:Teacher's Income Annualized

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Discussion Forum Index --> Tax Questions --> Teacher's Income Annualized


BRONCOSCPA (talk|edits) said:

2 August 2007
I had a client that just called and stated she heard an attorney state there is this new "Annualized income tax" for teachers and if you don't want to do this you must file a form prior to school starting - anyone familar with this - this is coming from a Texas Teacher

Dennis (talk|edits) said:

2 August 2007
Form would be W-4.

Taxref (talk|edits) said:

2 August 2007
I concur with Dennis. If it exists at all it may be something the school board is doing in respect to teacher withholding. There is no special federal rule for teachers in this regard.

NYEA (talk|edits) said:

2 August 2007
This was posted on a different tax message board - it addresses the issue that you asked about:

It is from TSTA, Texas State Teachers Assoc.

~*~*~*Recent changes have been made to income tax regulations which affect school employees who are paid out over 12 months. Many public school employees who work less than a full year chose to have their salary evenly distributed over 12 months. This is commonly referred to as “annualized compensation.”

New IRS regulations state that annualized compensation may be subject to an additional 20% excise tax. An employee can avoid this tax if the employee elects, in writing, to have his compensation annualized before an employee begins work for 2007-2008 school year. This regulation applies to both contracted and non-contracted school employees.

To avoid the penalty, if an employee who works less than 12 months wishes to have his salary spread over 12 months, the employee must make a written election to annualize his compensation. Most school districts have been advised of these new regulations and should provide employees with an election form. If your district does not have such a form, contact TSTA.

If an employee fails to make a written election by the first day of work of the new school year, the safest course of action would be to request non-annualized payments (receive pay on a 10- or 11-month basis, as applicable).

Once the election to annualize compensation has been made by the employee, it may not be revoked. Employees must elect to have their compensation annualized at the beginning of each new school year.

If you do not wish to annualize your compensation (because you either prefer to be paid on a 10- or 11-month basis, or because you did not sign the annualization form by the first day that you begin working), you may choose not to have your compensation annualized. If your district does not allow this procedure, contact TSTA.~*~*~*

TexCPA (talk|edits) said:

2 August 2007
Here is a suggested Form from The Texas classromm teacher's association:

[Payroll schedule election]

I hope this helps

TexCPA 18:47, 2 August 2007 (CDT)

TexCPA (talk|edits) said:

2 August 2007
T.D. 9321

look at pages 93-94: Elections to annualize recurring part-year compensation

TexCPA 18:49, 2 August 2007 (CDT)

1040man (talk|edits) said:

2 August 2007
I guess we better inform all of our school teachers of these NEW IRS regulations. I just sent e-mails to all of mine. What will the IRS think of next?

I just can't understand why this is of importance to the IRS ... how teachers receive their pay!

Dennis (talk|edits) said:

3 August 2007
Apparently because school year starts in September, salary annualization will result in some portion of current year income being paid in the succeeding year. ergo deferred comp from a non-qualified plan.

Bjc (talk|edits) said:

6 August 2007
I don't understand the purpose of this regulation. When I receive my W-2 form it is for the tax year (i.e., 2007) and includes payments from January through December, which includes the summer, but it is all in the same year. When I started working , from September, I receivesd a W-2 for the period September through December. What is deferred?

TheTinCook (talk|edits) said:

6 August 2007
What they are saying is that part of the salary you got during the summer of Year 2 was earned partly in spring of Year 2 and in fall of Year 1. It's the portion of income earned in Year 1 but paid in Year 2 that's the source of the problem.

Beengel (talk|edits) said:

August 6, 2007
Does anyone know if this applie to ALL teachers, those in private schools and Unitversity professors? ALso, what about support staff whose salaries are annualized-- same thing?

Any reference to the new regulations?

TexCPA (talk|edits) said:

6 August 2007
beengel: look at the link i posted above

GoalieEd (talk|edits) said:

7 August 2007
The IRS sent out a notice about this recently....

http://www.irs.gov/newsroom/article/0,,id=172884,00.html

In short, you don't have to worry about it (this school year) as long as the school year begints before 2008

That link is dead, but other IRS notices and announcements that relate to T.D. 9321 (re Sec. 409A) may be found here: [http://www.taxalmanac.org/index.php?search=%22T.D.+9321%22&ns0=1&ns2=1&ns3=1&ns4=1&ns8=1&ns10=1&ns12=1&ns14=1&ns110=1&ns112=1&ns114=1&ns118=1&title=Special%3ASearch&fulltext=Search&fulltext=Search Search "T.D. 9321".

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