Student leaders hit with tax increase as 'non-employees'

By Mary Georgevich

A change in employment status for students working for the eight chartered student organizations has resulted in some students having to pay up to $800 at once in taxes this year, an amount that would have been smaller and spread out over the course of the year under the previous system of pay.

The increased amount has left some students in debt and wondering why they weren't warned about this when the change was made.

The student leaders heading the CSOs were hit the hardest when the university changed their employment status last year for tax purposes from regular employees to independent contractors.

The university now calls these students "student stipend workers." This term does not define students under any Internal Revenue Service classification, which considers independent contractors small business owners.

Katy Erker, director of Santa Clara Community Action Program and a discover ministry intern, said she paid about $700 in taxes. She said she made a similar amount of money last year as she did in previous years when the government gave her money back at tax time.

"I'm in the hole now," Erker said.

Most of the students affected work for the eight CSOs, including Associated Students, KSCU and The Santa Clara.

Samantha Maciel, former APB director, said she paid $800 in taxes for the two quarters that she was paid as an independent contractor.

"Had I not been graduated and receiving a salary right now, I would not have been able to pay these taxes," she said.

As independent contractors, students are now responsible for paying all of the social security tax, half of which is normally covered by an employer.

Sarah Maciel, former scene editor for The Santa Clara and assistant director for APB, said the refund from her current position as a presidential fellow was enough to cover the amount of taxes she owed. However, she received much less money from the government than she would have as a regular student employee.

The Maciel twins said they turned to the university for help in filing their tax returns this year because TurboTax told them they were independent business owners. However, no one they spoke to could help them, they said.

"None of us knew what to do," Sarah Maciel said. "I still don't understand what I should have done."

Erker, who also used TurboTax, said she looked at other options for reporting her employment status, but ended up declaring herself a small business owner with the university as her only client.

"It's crazy to think of me as a small business owner having the huge corporation that Santa Clara is basically as my client," she said. "But as far as the IRS knows, that's what I am."

Erker said she wished she had been forewarned.

"I would have opened a savings account and saved up," Erker said. "But to be honest, I don't know if I could have taken on the position had I known. This is not the way a Jesuit University should treat its student leaders. I'm glad they're addressing it."

Jeanne Rosenberger, vice provost for student life, said she would look into any financial problems students may have encountered due to taxes.

"The decision to move students in these positions was not intended to pass along a financial hardship by any means," Rosenberger said.

Erker said she contacted administrators, including Rosenberger, who were sympathetic to the problem.

The CSO students had previously been paid as stipend employees through human resources. They received W-2 forms, which makes them employees of the university. Since the students were employees, all federal, state and social security taxes were withheld by the employer, the university.

"If you're an employee, in this case you would get a W-2, the employer is also going to withhold from you your social security taxes, which are 7.65 percent of your salary," Suzanne Luttman, a tax professor in the accounting department, said. "Then, the employer has to match that contribution. So the employer will also put 7.65 percent of your salary into social security."

Because of the change, students working for these organizations have instead been given an IRS 1099-MISC form for their tax returns, which required them to pay the full 15.3 percent of their salaries into social security.

"If you're self-employed, you're considered to be both the employer and the employee," Luttman said. "The benefit of being an independent contractor is that you get to offset your income with any expenses you incur."

For example, the cost of transportation to the job or the computer used to do the job could both be deducted from the income.

Sarah Maciel said she was unaware that by listing those and other expenses, she could save money. "I could have been keeping track of that stuff," she said.

Jon Gray, director of the center for student leadership, said he doesn't provide tax advice. So when students came to him, he referred them to University Controller Sarah Gatenby. Gatenby was unavailable for comment.

Luttman said the employer should not be responsible for explaining how to file taxes.

"It should be clear in their employment discussion that the worker is not considered to be an employee and my guess is that it's sufficient to tell them that taxes will not be withheld," Luttman said.

Gray said the only place the pay process is explained is on a stipend payment form that students must fill out to receive their paychecks. It states, "A 1099-MISC will be issued to the recipient for all stipend payments."

Sarah Maciel said she hopes the university will tell students about the tax issues in advance. "I hope in the future that Santa Clara can do something to help them out," she said.

Rosenberger and others in a committee who implemented the change have said the employment change was part of a review of all student employment positions, which started fall 2005 when student employment was placed under the Office of Student Life.

Contact Mary Georgevich at (408) 554-4546 or mgeorgevich@scu.edu.