An IRS general audit of the city of Rock Hill last year took issue with its longtime practices of how employees were classified as employees or independent contractors, according to The Rock Hill Herald. The investigating IRS agent made a point of sorting through why some employees were filing W-2s, some were filing 1099s, and others were filing both.
In the Rock Hill recreation department, its umpires, referees, scorekeepers and arts and crafts program leaders should not have been treated as independent contractors but as employees and paid so that income tax and portions of Social Security and Medicare taxes were withheld.
Drew Cooper, Rock Hill’s financial compliance manager, said the city had been using its filing system “for decades.” Rock Hill has paid almost $3,000 to make up for what should have been paid as being responsible for Social Security, Medicare and unemployment taxes on wages. The city has a deadline of this year to correctly categorize its employees.
Rock Hill has about 900 employees, and the IRS decision will impact nearly 200 more, such as seasonal workers. In the past fiscal year, the rec department estimates more than 1.4 million people used its parks and rec centers in the past fiscal year and that more than $40 million was generated in sports tourism of clinics, leagues and tournaments.
The nearby cities of Fort Mill and Tega Cay have since been reviewing their policies. Tega Cay’s city manager said it pays its referees, who are not under contract, a set amount per game and then paid a lump sum at the end of the sports season and given a 1099.