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We are a non-profit corp that provides emergency shelter services

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and transitional housing to homeless...
We are a non-profit corp that provides emergency shelter services and transitional housing to homeless people. We have a person who lives in one of our apartment units to monitor the transitional housing facilities (property & resident families) during non-business hours and contacts 911 or the "on-call Staff person" if there is an incident with the residents or an emergency repair situation. This individual is given one of the apartment units & paid utilities as compensation and is expected to live on-site in the unit. Time away can be up to 24 days per year and need to be arranged in advance with the Executive Director of the Organization.
Is this "resident advisor" an employee or independent contractor?
Submitted: 7 years ago.Category: Tax
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7/1/2010
Tax Professional: Lev, Tax Advisor replied 7 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,713
Experience: Taxes, Immigration, Labor Relations
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IRS publication 15 - http://www.irs.gov/pub/irs-pdf/p15.pdf is the main document that addresses employee status = page 7. A general rule is that anyone who performs services for you is your employee if you can control what will be done and how it will be done. This distinction is important because an employee and self-employed are taxed differently.

 

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Facts that provide evidence of the degree of control and independence fall into three categories:
- Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker's job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

 

If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker's status.

 

A lodging is considered a fringe benefit which is a form of pay for the performance of services. Any fringe benefit provided to an employee is taxable and must be included in the recipient's pay unless the law specifically excludes it.

 

Please refer to IRS publication 15B - www.irs.gov/pub/irs-pdf/p15b.pdf

You can exclude the value of lodging you furnish to an employee from the employee's wages if it meets the following tests.

  • It is furnished on your business premises.

  • It is furnished for your convenience.

  • The employee must accept it as a condition of employment.

The exclusion does not apply if you allow your employee to choose to receive additional pay instead of lodging.

On your business premises. For this exclusion, your business premises is generally your employee's place of work.

For your convenience. Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. This is true even if a law or an employment contract provides that the lodging is furnished as pay. However, a written statement that the lodging is furnished for your convenience is not sufficient.

Condition of employment. Lodging meets this test if you require your employees to accept the lodging because they need to live on your business premises to be able to properly perform their duties. Examples include employees who must be available at all times and employees who could not perform their required duties without being furnished the lodging.

 

If these conditions met - an employer should not include the value of lodging into employee's taxable wages.

Let me know if you need any help.

 

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Customer reply replied 7 years ago
I got all this from reading publications 15A & 15B. I am also aware of form SS-8 and have downloaded the form & instructions. What I get from your response is that this individual is likely to be classified as an employee. They must live on our premises in order to fulfill the job assignment requirements. Their presence ensures residents comply with the program requirements (no drugs, alcohol, weapons). If the housing provided to this individual (for the organization's benefit and it is required they reside in the apartment on our premises) is the only form of "compensation", am I correct there will be no reportable compensation? They receive no other payments and are not entitled to any other benefits.
Tax Professional: Lev, Tax Advisor replied 7 years ago

I am glad to know that you have a sufficient knowledge about determination of a worker's status.

 

Please be aware that answers posted on that site are for general information, and are not intended to substitute for informed professional advice and do not establish a professional-client relationship.

Thus I may help you to determine the worker's status, but I am not in the position to make such determination.

If based on provided information you are still unable to determine if the worker is an employee or a self-employed contractor - the IRS might do such determination and the form SS-8 is a formal way to request the determination from the IRS.

 

However - if you have an employee - regardless of the type of your organization - you are required to pay at least minimum wages, pay FICA and FUTA taxes.

If you exclude the value of lodging from wages - you still need to track working hours and pay wages.

 

If you the person provides service to non-profit organization without compensation - that person is not an employee.

Sometimes non-profit organizations give small compensation to volunteers - which is a taxable income - but not wages and not a self-employment income.

In this case - the value of lodging would constitute such income.

 

The question in this situation - if you may use same rules to exclude the value of lodging provided to volunteers as for employees?

I personally think yes - but please be aware that there is no clear determination and such interpretation bears a risk.

 

So to address your question - am I correct there will be no reportable compensation?

Most likely - you are correct, but you need to be clear with determination of the person's status and the type of compensation as discussed above.

 

Let me know if you need any help.

 



Edited by LEV on 7/1/2010 at 5:41 PM EST
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