Greetings. Welcome to today's webinar, Taxation of Election Worker Compensation. And at this time, I will now turn the conference over to your host, Juli . You may begin.

[Juli - Internal Revenue Service Representative] Hello, everyone. Welcome to the IRS Federal, State and Local Presentation on Election Workers. My name is Juli.

[Casey - Internal Revenue Service Representative] And my name is Casey . We're excited to bring you this webinar, which will help you understand the taxation of election worker compensation. Before we begin, it's important to note, this presentation is general information only and is not official guidance. We would also like to thank everyone who submitted questions prior to the event and let you know that we will address the answers to your questions within material we are delivering today. Today's presentation will answer the following topics: what workers are considered election workers; how much can election workers earn without taxes being withheld; the difference between reportable and taxable wages; and whether training and expense reimbursements are considered taxable income.

Each year, state and local governments hire workers for primary and general elections. Election worker positions could include supervisor, clerk, assistants, tab or machine inspector, commissioner or deputy. They are hired by towns, cities, states or any other government entity to work at polling places in connection with local, state and national elections. These employees perform a valuable community service by assisting fellow voters at polling sites on Election Day.

States are responsible for certain aspects of elections, but the federal government also has a role. No state administers an election in the same way as another state. There can be quite a bit of variation in election administration within a state. Our election system varies throughout the U.S., but it includes the selection of candidates, registration of voters and voting procedures.

Each state has the power to establish some of its own laws regarding voter requirements, and the frequency of statewide elections. Most states have a state association of election officials that meets periodically to discuss election procedures. Each state has a Chief Election Official, who has the ultimate authority over elections in the state. Additionally, there may be a state office of elections to oversee that election laws are followed by the local officials. Elections are usually carried out at the county level, or boroughs in Alaska and parishes in Louisiana. In some New England and Midwestern states, it falls to cities or townships to run elections. In all, this means there are more than 10,000 election administration jurisdictions in the U.S. At the local level, elections can be run by a single individual, a board or commission of elections, or a combination of 2 or more entities. There are a variety of different roles that a worker may fill. The details of which vary by jurisdiction and position. Election workers play a crucial role in ensuring the integrity of the voting process. They serve inside a polling place, checking voters, answer questions, set up and test voting machines, issue ballots and act as a resource for voters. Workers assist in setting up the election locations before voters arrive and they may interact with the voters as well. Their duties include making sure voters are at the correct precinct, verifying voter registration, issuing ballots, giving voting procedure instructions, operating voting equipment and maintaining an orderly flow at the polling place.

State election officials may provide training for local election workers since most state election laws require training. However, the requirement for training may only apply to certain poll workers, such as the supervisor or chief poll worker. The training may cover the roles, mechanics of the voting process and operating the equipment. State election officials may issue certifications for completing the required or optional training. Now, that we have discussed what election workers do and the training they may receive. Juli, can you tell us a little bit more about what to do when election workers receive compensation?

[Juli - Internal Revenue Service Representative] Yes, I can, Casey. Election workers can work very long days. They might work from dawn to late in the evening. Which brings us to a very important question: Does an election worker get paid? Generally, an election worker receives compensation from the government entity that hired them for the election. The pay can be a set dollar amount per day, sometimes called a stipend for the election worked. This form of compensation is considered taxable income. In some states, a poll worker may opt out of their lawful compensation, and spend their time working as a volunteer. Poll workers serve as non-compensated volunteers in quite a few states, and youth poll workers may serve as volunteers in several states. Any compensation paid by the government to the election worker is considered taxable income. Therefore, pay for the time dedicated to training is taxable compensation too. Most election workers receive some training and are sometimes reimbursed for their travel or other expenses they incur personally to perform election work. Would money paid to them to reimburse them for these expenditures also constitute taxable compensation? Reimbursements for ordinary and necessary cost to conduct training or travel for training is usually not taxable compensation if the accountable plan rules are met.

If an election worker incurs an expense that is business related, in this case, election related, and it is an ordinary and necessary expense to conduct election work, they document the expenses with a valid receipt and return any excess, the government entity reimbursement to the election worker meets the accountable plan rules and is non-taxable. A couple of examples of expenses that may be non-taxable are training costs and travel from poll site to poll site. However, since election workers are employees that commute to work is a personal expense, and if it is reimbursed would be considered a taxable fringe benefit that included in wages. Another question that comes up is: are election workers considered employees? Yes, election workers are considered employees. Technically, they are called common-law employees. The employer has the right to control: what will be done; how it will be done; and where it will be done. Common-law employees do have payroll taxes withheld, and the employer is required to pay their share of the payroll taxes as well. Election workers should fill out a Form W-4, Employee's Withholding Certificate.

An election worker's wages are includable in gross income as compensation. However, compensation paid to an election worker is not subject to federal income tax withholding, Internal Revenue Code 3401(a) and Treasury Regulation 31.3401(a). IRC Section 3402(p) allows employers and employees to enter into voluntary agreements to withhold income tax from wages for services performed. Election workers may request this voluntary income tax withholding by completing and giving the employer a Form W-4, Employee's Withholding Certificate. Let's take a closer look at when an election worker is subject to Social Security and Medicare tax withholding. Casey, can you tell us a little more about this? Casey - Internal Revenue Service RepresentativeSure, Juli.

From January 1, 2020 forward, the Federal Insurance Contributions Act, otherwise known as FICA, tax exclusion for election officials and election workers is $1,900 a calendar year, unless those wages are subject to Social Security and Medicare taxes under the State Section 218 Agreement.

Under Section 218 of the Social Security Act, many states have excluded from coverage, election workers paid less than the threshold amount mandated by law. Therefore, Social Security and Medicare taxes do not apply until the election worker is paid $1,900 or more. If election workers are covered by a Section 218 Agreement with the Social Security Administration, the terms of the agreement will determine whether the payments are subject to FICA. Many states have excluded election workers whose pay in a calendar year is less than the federal threshold amount, which is currently $1,900. Some State Section 218 Agreements may specify a lower threshold amount for election workers, for example, $50 a calendar quarter or $100 a calendar year. Social Security and Medicare taxes apply from the first dollar paid, if an election worker is paid the threshold amount or more, or the State's Section 218 Agreement does not have an election worker exclusion, or the entity's Section 218 Agreement does not have an election worker exclusion. If there is not a Section 218 Agreement, the rules for mandatory Social Security and Medicare apply. Services not subject to mandatory Social Security and Medicare coverage include those performed by an election worker, whose pay in a calendar year is less than the federal threshold amount per Sections 3121(b) and 3121(u). However, FICA taxes apply from the first dollar paid, if an election worker is paid the federal threshold amount or more. So for example, when payments made to an election worker in 2021 meet the federal threshold amount of $1,900, all amounts paid to the worker are subject to FICA including the first $1,899. As you can see, it is very important to determine whether election workers are covered by a Section 218 Agreement. So, how can you find your state's coverage for election workers? You can visit SSA.gov/slge for more information.

To determine if there is a statewide exclusion for election workers in your state, visit the election worker coverage chart at the Social Security Administration's website. To find the Social Security and Medicare tax exclusion threshold amounts for election workers, visit the SSA website and search election workers. So far, we have discussed how to determine whether a worker is subject to Social Security and Medicare tax withholding. Juli, can you tell us more about when to withhold FICA tax? Juli - Internal Revenue Service RepresentativeSure. If it looks like an election worker may earn the Social Security and Medicare threshold amount or more in a calendar year, a state or local government employer may choose to start withholding Social Security and Medicare taxes on the first dollar earned. If the worker then doesn't make the threshold amount in the calendar year, the worker would be due a refund of the withheld Social Security and Medicare taxes. If the employer chooses not to withhold taxes until after the worker earns the federal threshold amount, then the employer is responsible for withholding Social Security and Medicare taxes due from the first dollar earned. Let's talk about reporting income on the Form W-2, IRC 6041(a) relates to payments of compensation that are not subject to withholding of Social Security and Medicare or income taxes. The government entity must file a Form W-2 for the election worker, who receives income of $600 or more, even if no Social Security, Medicare and income taxes were withheld. However, if the worker received wages for only the election work and the total is less than $600 for the year, Form W-2 is not required if no Social Security and Medicare tax was withheld. IRC 6051(a) states that income must be reported in relation to either Social Security and Medicare tax or income tax withholding. If the election workers income has Social Security and Medicare withheld reporting is required by IRC 6051(a) regardless of the dollar amount. As an example, a Form W-2 must be filed for each election worker who received income of less than the $600 threshold amount, if the income was subject to Social Security and Medicare taxes under Section 218 Agreements. Now, if you have an election worker who is also employed by the government entity in another position, the employer may choose to use separate Forms W-2 to separate employee income earned as a non-election worker from income earned as an election worker. See Revenue Ruling 2000-6 for instructions and examples. Do not use Form 1099-MISC or NEC to report election worker income. Now, let's go over a few examples to demonstrate the rules we have covered so far. Example 1 will demonstrate the withholding and reporting requirements. When an election worker position is covered by an entity's Section 218 Agreement and the worker is paid at or greater than the threshold amount and does not hold any other position for the entity, government entity pays worker A $2,000 for election worker services in 2021. Election workers are included in the entity's Section 218 Agreement once they are paid $1,800 or more. Worker a does not perform any other duties for the government entity.

Because the payment made to worker A is $1,900 or more, Social Security and Medicare withholding is applicable on the entire $2,000. The payment must be reported as Social Security and Medicare wages on Form W-2 for IRC Section 6051(a). Income tax withholding is not applicable, but the $2,000 is reported as wages on Form W-2. The individual must report these earnings on their personal income tax return. In this example, $2,000 is reported in boxes 1, 3 and 5 for Form W-2.

No amount is reported in box 2 for federal income tax withheld, but $124 for the Social Security taxes withheld is reported in box 4 and $29 for the Medicare tax withheld is reported in box 6.

Casey, please take us through another example. Casey - Internal Revenue Service RepresentativeOkay. Example 2 will demonstrate the withholding and reporting requirements when an election worker position is not covered by an entity's Section 218 Agreement and the worker does not hold any other position for the entity and is paid less than the federal threshold amount. In this example, government entity pays worker A $650 for election work in 2021. Worker A does not hold any other position for the entity. Since the payment made to worker A is less than the current federal threshold amount of $1,900, the worker is not subject to Social Security and Medicare withholding. Federal income tax withholding does not apply, but the $650 is reported as wages on Form W-2 per Section 6041(a). The individual must report the earnings on their personal income tax return. In this example, only wages of $650 are reported in box 1 of Form W-2. No amounts are reported in Social Security wages box 3 or Medicare wages box 5 on the Form W-2. Juli, could you discuss example 3. Juli - Internal Revenue Service RepresentativeExample 3 will demonstrate the withholding and reporting requirements when the entity has Section 218 Agreement and the worker provides other services covered by the entity's Section 218 Agreement and is paid $600 or more. There are specific rules regarding Social Security and Medicare coverage, and the correct amount to exclude. Government entity pays worker A $100 in 2021 for election worker services, and also employs worker A in another capacity in which worker A earns $1,000. The $100 earned as an election worker for worker A is excluded from the Section 218 Agreement, but the non-election services are included. The $1,000 payment is subject to income tax, Social Security and Medicare withholding. But the $100 payment is not, because the government entity made payments in 2021 to worker A equal to $600 or more. The government entity must report all payments as wages, box 1, on Form W-2 per Sections 6041(a) and 6051(a). Separate Forms W-2 may be used for the 2 types of payments. Casey, can you take us through our last example? Casey - Internal Revenue Service RepresentativeSure. Example 4 will demonstrate the withholding and reporting requirements when the entity does not have a Section 218 Agreement and the worker does not provide any other services, and is paid at least the federal threshold amount. In this example, the government entity does not have a Section 218 Agreement. The election worker, worker A, provides no other service to the entity and is paid $2,000 in 2021 for election worker services. Since worker A received compensation equal to or greater than $1,900, the entire $2,000 of income is subject to Social Security and Medicare. The payment must be reported as Social Security and Medicare wages on Form W-2 per section 6041(a) and 6051(a).

Income tax withholding is not applicable, but the $2,000 will be reported as wages on the Form W-2. In this example, $2,000 is reported in boxes 1, 3 and 5 on the Form W-2. No amount is reported in box 2 for federal income tax withheld. Report $124 in Social Security tax withheld in box 4 and $29 in Medicare tax withheld in box 6. In conclusion, compensation paid for election worker services is considered taxable wages and must be included in the gross income of the employee. Juli, can you go over where to find additional guidance? Juli - Internal Revenue Service RepresentativeFor additional guidance on election workers, you can view the instructions for Forms W-2 and W -3; Publication 963 Federal/State Reference Guide for state and local government employers; Publication 15 Employer's Tax Guide and Revenue Ruling 2000-6. For additional guidance on expense reimbursement, you can look at Publication 15-B, the Employers Tax Guide to Fringe Benefits and Publication 5137 Fringe Benefit Guide. This now concludes our presentation on election worker compensation. Thank you for listening.