April 14, 2017
By Salvatore J. Armao, CPA/PFS, CFP, CFE, CGMA
This is the fourth in a series on proper tax reporting for labor unions. As we reach the tax deadline this month, labor unions should be aware of all circumstances in which they may make common errors in tax reporting. This article focuses on Shop Steward dues.
Many Union Locals follow the policy of reimbursing shop stewards for their dues in order to compensate them for assuming additional responsibilities that are associated with the position.
Under the IRS letter ruling 8735005, May 15, 1987, the IRS considers “All officers and stewards of the Union Local as full time employees of the International Union who are involved in its day to day activities and performed functions that were necessary and incidental to the union’s business”. Therefore, payments made by the Union to members for time spent conducting union business are considered to be wages. Consequently, the Union Local must issue a W-2 to shop stewards and withhold employment taxes for amounts paid to shop stewards whether for reimbursement of dues or otherwise.
In order for the Union Local to avoid having to issue a W-2 to shop stewards who receive payments for dues, reimbursements or otherwise, two approaches can be taken as follows:
a) Require shop stewards to submit an expense report for travel, transportation or other expenses incurred in performing their duties as shop stewards. (i.e.: attending meetings, negotiations, grievances, arbitrations, etc.)
b) Allow shop stewards to forego payment of dues so that no reimbursement would be necessary.