Adjunct Professor Held an Employee; Teaching Expenses Subject to 2% Floor

September 19, 2011

Court cases going back to the 1939 Internal Revenue Code have repeatedly held that part-time or adjunct faculty members are common law employees of the schools for which they teach. Oftentimes, these cases come before the courts because the faculty member classifies himself or herself as an independent contractor to claim the expenses incurred in teaching the class on Schedule C of Form 1040, as opposed to Schedule A for employees. Schedule C allows independent contractors to claim the full amount of business expenses as a deduction, whereas Schedule A allows employees to claim only those expenses that exceed 2% of their adjusted gross income. In many of these cases, the teacher claims he or she is an independent contractor, even though the school classifies the teacher as an employee.

In Schramm v. Commissioner, No. 8938-09 (T.C. Aug. 30, 2011), a professor who taught an Internet-based course for a university attempted to claim deductions on Schedule C as an independent contractor, even though the university classified him as an employee and reported his wages on Form W-2. The Tax Court, consistent with many past decisions, rejected his position. In reaching its conclusion, the court examined the following factors:

  1. the degree of control exercised by the principal;
  2. which party invested in the work facilities used by the worker;
  3. the opportunity of the individual for profit or loss;
  4. whether the principal can discharge the individual;
  5. whether the work is part of the principal’s regular business;
  6. the permanency of the relationship;
  7. the relationship the parties believed they were creating; and
  8. the provision of employee benefits.

The Schramm court examined each of the above factors and concluded that although some of them, such as the lack of employee benefits paid to the teacher, suggested he was an independent contractor, the balance of the evidence suggested the contrary. The Tax Court’s decision was interesting because the teacher in question taught the course over the Internet from a location of his choosing, but the Tax Court felt that was a minor point in considering the amount of control the university exercised over his employment.

Although there are at least two cases in which the courts have concluded that a part-time teacher or adjunct professor was an independent contractor, they appear to be based on distinguishable facts or at variance with the weight of authority. In one case, for example, the teacher in question was a full-time professor for a university, but he also occasionally taught seminars for a business institute established and operated by the university. The court held that although the professor was an employee of the university, generally, he performed services for the business institute as an independent contractor.

In light of the foregoing, it appears well-settled that adjunct professors are generally considered to be employees both for employment tax purposes and for purposes of claiming a deduction for expenses incurred in performing their duties as a professor. Institutions with adjunct faculty should consider reminding their part-time and adjunct faculty members that expenses they incur in connection with teaching are subject to the 2% floor for employee expenses.

Subscribe