The Little League® organization is a Federal Incorporation granted under a Bill signed into law by President Lyndon B. Johnson on July 17, 1964, and amended December 24, 1974, to reflect the admission of girls – it is the only youth sports program so honored.
Incorporated as a not-for-profit organization, Little League Baseball and Softball is tax exempt and its properties and holdings also are ruled tax exempt for local assessment. Little League International, based in South Williamsport, Pa., recommends each local league incorporate to establish a degree of permanency and stability. Incorporation also reinforces the non-profit nature of a local league.
As a general rule, incorporation relieves the officers and managers of personal liability for damages as a result of injury. However, if a person or persons within a local Little League receives compensation for participation in any capacity (other than the materials and/or items necessary to complete the task or job) said protections no longer exist. This typically refers to receipt of monies paid upon completion of a task or job.
ACCOUNTING DIRECTION WHEN PAYING INDIVIDUALS
If a local league elects to pay individuals to provide services (i.e., umpires, concession workers, etc.), the league will be subjected to tax withholding and reporting requirements mandated by the Internal Revenue Service (IRS) that apply to all employers. The term “employer” includes not only individuals and organizations engaged in trade or business but also organizations exempt from income, Social Security, and unemployment taxes such as local Little League programs. State and local regulations would also apply.
The term “employee” must be distinguished from an independent contractor for purposes of employment tax obligations and reporting requirements. An employer does not generally have to withhold taxes on payments to independent contractors. In addition to the common legal definition that focuses on the control that is exercised over what work is done and how it is done, the IRS uses a 20-factor test to assist in making this determination. For additional information regarding determining whether an individual is an employee or independent contractor, please visit the IRS website, at: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee . Reference: Paying Independent Contractors.
Any tax withholding is based on gross wage payments. The term “wages” includes all remuneration for services performed including the cash value of all remuneration paid in and medium (i.e., equipment, apparel, other gear, etc.). Taxes must be withheld from the wages paid for each payroll period.
An employer subject to income tax withholding must file a quarterly return, or if eligible, an annual return. Annually, Forms W-2, 1099-R, and Transmittal Form W-3 must be filed with the Social Security Administration (SSA) by the last day of February of the year following the year included in the return. The SSA transmits the income tax information on the return to the IRS.
On or before January 31, every employer is required to furnish every employee with copies of Form W-2 for taxes withheld during the preceding year. If the worker is classified as an independent contractor, the employer must provide the worker with a Form 1099 by the same date. For additional information regarding an employer’s responsibilities specific to employees, please visit the IRS website, at: www.irs.gov/pub/irs-pdf/p15.pdf (Department of Treasury Internal Revenue Service Publication 15 (Circular E), Employers Tax Guide.)
INSURANCE DIRECTION FOR VOLUNTEERS, EMPLOYEES, AND INDEPENDENT CONTRACTORS PROVIDING SERVICE TO LOCAL LEAGUE
A league may be made up of all volunteers or a mixture of volunteers, employees, and/or independent contractors. Little League Baseball and Softball recommends that leagues use all volunteers in their programs. However, this decision is made by each local league as to what it feels is necessary and appropriate. It is essential that leagues clearly understand that these three areas are distinct from each other and insurance coverage will depend upon the category in which the individual falls.
If an individual is a volunteer, then insurance benefits would be available through local leagues that are insured in the Little League “National Program,” as outlined in material provided to the local league by Little League Baseball and Softball. Since payment for services is not being provided to volunteers, then there are no complications with respect to insurance coverage issues which develop when leagues choose to use employees and/or independent contractors.
Each state has different requirements with regard to workers’ compensation benefits, including penalties for failing to have such coverage in place. Generally speaking, when an individual is an employee and is injured on the job, then he or she would be covered under workers’ compensation benefits and not under an accident or health insurance policy. To understand the distinction, league officials should consider their own work environment, where an on-job injury would be covered under their employer’s workers’ compensation policy rather than their own health insurance plan. The same applies to a person who is employed by a local league. In other words, when it comes to workers’ compensation, there is no difference between a local league employee and an employee of a large or small business.
If leagues choose to use an independent contractor, then it is extremely important that the local league have a contract with that individual that clearly states that he or she is an independent contractor and that any payment for services received is the total compensation. The contract should also state that the independent contractor is fully responsible for his/her insurance needs and issues. Little League International recommends that local leagues contact a local attorney for the purpose of reviewing the contract and to ensure that it complies with the laws and regulations of the state.
When leagues choose to pay individuals, they need to ensure that they are complying with the local, state, and federal accounting and insurance regulations. Failure to properly adhere to these laws and requirements may result in significant fines and/or serving time in prison. Therefore, Little League International strongly encouraged local leagues that choose to use employees and/or independent contractors to make sure they are compliant with all laws and regulations.
If your league uses employees or independent contractors, Little League International recommends that the local league contact the appropriate state office to make sure the league is compliant with all workers compensation laws and regulations.