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IRS Required Tax Withholding from Stipend Payments
The County of Orange pays certain board and commission members stipends for attending meetings. Since they have not been treated as employees, no taxes have been withheld and the income received by these board and commission members has been reported to the Internal Revenue Service (IRS) on a Form 1099-Miscellaneous Income. Relying on IRS Guidance, the Auditor-Controller and Human Resource Services have determined, out of an abundance of caution, that board and commission members should be treated as County employees for income reporting purposes. This determination will require that board and commission members who receive stipends for attending meetings will now have federal and state income taxes withheld from their County payments. Additionally, the County will withhold employment taxes (Social Security/Medicare) and issue a Form W-2 for Calendar Year 2018 to these board and commission members.
Frequently Asked Questions:
1.Do I receive retirement benefits as member of a County Board or Commission?
The determination to treat board and commission members who receive meeting stipends as employees for withholding purposes will not cause these members to qualify for pensions under the Orange County Employees’ Retirement System (“OCERS”) or require the County to offer these members health insurance.
OCERS Member Eligibility Guidelines state that only a member “hired with the expectation of employment for more than one year and at least 1,040 hours per year, or who is actually employed for more than one year and at least 1,040 hours per year for at least one of those years” is eligible for OCERS membership. Board and commission members paid by meeting stipend do not accumulate enough hours of service in any calendar year to qualify for OCERS pensions.
2.Do I receive healthcare benefits from the County as member of a County Board or Commission?
Under the Affordable Care Act, the County is required to offer health insurance only to full time employees. Under 26 U.S. Code § 4980H (c)(4)(A) a “full-time employee” is an employee who averages at least 30 hours of service per week. Board and commission members paid by meeting stipend do not accumulate enough hours of service to require an offer of health insurance coverage.
3.Am I entitled to any sick or vacation leave balances?
California’s Healthy Workplace Healthy Family Act of 2014 provides that employees who work for 30 or more days in a year are entitled to paid sick leave. This includes part-time and temporary employees. Most board and commission members are not entitled to this provision as meetings only occur once per month. Individuals who serve on multiple boards or commissions should notify Human Resource Services of their attendance in the various meetings to determine if this provision is applicable to them. Vacation leave balances are not provided to board and commission members.
4.Can I just receive a 1099 instead of having taxes withheld?
Under Internal Revenue Code regulations and guidance, board and commission members are considered County employees for withholding purposes and their wages should be reported on a Form W-2 with applicable income and employment taxes withheld.
5.Can I be paid through a written check instead of direct deposit?
Board members and commission members have the option of having their stipend payments paid through a written check. The Auditor Controller’s Office recommends payments through direct deposit as it is a safe and convenient manner to receive payments. It also allows immediate access to funds from virtually anywhere. Signing up is easy and takes only a few minutes. Individuals may contact the Auditor-Controller’s Office at (714) 834-2974 for the Direct Deposit Authorization Form.
6.Who do I contact if I have additional questions regarding this change?
Board and commission members may contact Susan DeBaun, Human Resource Services Manager at (714) 834-2846 for further information. The Auditor-Controller’s Office can be reached at (714) 834-2974 for any questions on direct deposit or AskCentralPayroll@ac.ocgov.com for any W-2 information.
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