Edwards Didn't Pay Taxes For Campaign Staff
Re-elected congresswoman treats part-time staff as contractors which may run afoul of IRS.
Capital News Service
Rep. Donna Edwards did not provide health insurance, cover payroll taxes or pay for unemployment insurance for their campaign workers, a practice that may skirt IRS rules.
She avoided these costs by paying their campaign staffs as independent contractors instead of regular employees, according to expense reports filed with the Federal Election Commission.
The only other Maryland congressional candidate to fail to pay benefits was Rep.-elect Andrew Harris, the Republican whose anti-"Obamacare" stance was a key plank in his campaign to unseat first-term Rep. Frank Kratovil in Congressional District 1.
Edwards represents Congressional District 4, which includes parts of Germantown, Montgomery Village, Gaithersburg and Rockville.
Employers are not mandated to provide health care for workers, but they are required to pay part of their employees' Social Security and Medicare taxes — which can add up quickly, accountant Garrett Isacco said. Independent contractors pay these taxes themselves.
"Some employers would very much not like to do that because it can get quite expensive," Isacco said, adding that the taxes do get paid either way. "At the end of the day it probably evens out; it's just a question of whose pocket it's coming out of."
Edwards communications director Dan Weber said her campaign only had three staffers, including himself, who worked part time and as such considered themselves contractors.
"We don't spend the majority of our time working for the campaign," Weber said. "We are independent contractors."
Edwards, D-Fort Washington, last paid payroll taxes for her campaign workers in June 2009, according to FEC records. In 2010, she spent about $28,700 in "consulting fees" for Weber and campaign manager Adrienne Christian; both also work in her congressional office.
Weber attributed 2009's payroll costs to an employee who has since "switched" to contractor status.
All other incumbent Maryland U.S. representatives list payments for payroll taxes.
The Internal Revenue Service's line between worker and contractor is sometimes blurry. Former IRS trial attorney Bruce Gardner said "the crux of that test" is the authority that supervisors have.
"If (the employers) dictate what time they have to be there, what they have to do ... if they designate the place, if they review the person's work," Gardner said, "if you're trying to establish that the person was an employee, then that's something you would look for."
Isacco said he encouraged his clients to be especially careful if there was any question about how to classify workers.
"It can be really harsh," Isacco said. "If the IRS comes in and audits you and says you misconstrued your employees, they will levy all kinds of back taxes and penalties and interest."