School districts regularly work with coaches, consultants, contractors, and temporary staff, but not every role is created equal when it comes to tax treatment. Misclassifying an employee as an independent contractor can lead to IRS penalties, Department of Labor inquiries, and issues for all involved.
W-2 or 1099? IRS Rules Explained
The IRS uses three categories to evaluate worker classification:
- Behavioral Control – Does the district tell the person when and how to work? If so, the worker is likely an employee.
- Financial Control – Who supplies tools and resources? Can the worker experience profit or loss?
- Relationship of the Parties – Is there a contract? Are benefits offered? Does the role resemble a typical employee relationship?
If the district sets the schedule, provides materials, and supervises the day-to-day work, you’re likely dealing with an employee, not a contractor.
Common Examples in Schools
- Coaches are almost always employees. They follow school schedules, use district facilities, and interact with students. Their wages should be reported on a W-2.
- School Board Members, despite being elected officials, must also receive W-2s. These roles are not exempt from tax reporting.
How to Stay Compliant
- Review job duties for each worker and compare them to IRS standards.
- Use written contracts for all independent contractors and request W-9 forms.
- Document your rationale for how each role is classified.
A Thoughtful Approach to Classification
When it comes to employee vs. contractor decisions, erring on the side of caution can save you time and money down the road. Misclassifications aren’t just paperwork mistakes—they can become compliance violations that create more work and confusion later.
Taking time to get it right from the start—by reviewing roles, documenting decisions, and seeking guidance—helps ensure you’re following the rules and building trust with your staff, team, and community.