Taxes and Teachers
I just received this "tax tip" e-mail from our accountants Macdonald, Page & Co. Since it deals with good news for teachers about taxes, I thought I'd pass it along. My thanks to the folks at Macdonald, Page . . . and the folks at the IRS too.
Teachers can easily escape the tough deferred compensation rules.
Teachers who work nine or ten months during the school year often are paid (or may have the choice to be paid) over a period of twelve months. In a news release and frequently asked questions (FAQs) posted on its website, the IRS has reassured such teachers that they will not become victims of the Tax Code's draconian deferred compensation rules. These rules could cause a teacher to be taxed before he receives some of his pay. However, under the regulations, teachers can easily avoid the problem. For example, take the case of a teacher who earns compensation from Sept. 15 of one year through June 30 of the next year. The teacher could elect to defer compensation earned during that period on any date before Sept. 15 of the first year without running afoul of the deferred compensation rules, but only if no amount is deferred beyond Oct. 31 of the next year. No particular form is necessary for the election, it does not have to be made each year if the arrangement provides that a pre-existing election remains in place until the employee changes it, and the election does not have to be filed with the IRS.
~John Brandt
