The National Volunteer Fire Council board this week formally opposed the Volunteer Firefighters Fairness Act (H.R. 2630). The active bill recommends amending the Internal Revenue Code of 1986 to classify volunteer firefighters as independent contractors for the purposes of taxing their benefits. The act is in the first step in the legislative process and has been referred to the House Ways and Means Committee. If passed, the amendments would apply to services performed after Dec. 31, 2011.

Volunteer numbers have trended downward, decreasing from 880,000 in 1984 to 827,150 in 2008, according to the National Fire Protection Association. Since volunteers make up 72% of the nation’s fire and emergency services, some state and local governments may offer paid expenses, reasonable benefits, a nominal payment or any combination as a recruitment tool.

Historically, fire departments used IRS Form 1099 to report benefits and nominal payments for their volunteers. Increasingly, volunteer fire departments are being instructed by local IRS offices to use Form W–2 to report the payments and reasonable benefits, instead of Form 1099.

However, H.R. 2630 authors claim volunteer firefighters performing specific duties should not be considered as an employee, and the fire department should not be considered as an employer of their services. Instead, volunteers should be treated as independent contractors and benefits filed under 1099.

The NVFC is concerned that passage of H.R. 2630 would shift a tax and reporting burden shared by the department and the volunteer onto to the volunteer alone, said Dave Finger, NVFC director of government relations. While the move makes it easier on the fire department by eliminating the payment of payroll taxes, it reduces the effectiveness of monetary incentives put into place to recruit personnel, Finger said. Under the act, volunteers would be responsible for the total of payroll taxes — usually shared by the employer — in addition to sorting out tax codes or hiring an accountant to make sure it’s done right.

“That raised issues because when you are treating them as employees, you have to pay payroll taxes,” he said. “Under the bill, those payroll taxes don’t go away. [Volunteers] are going to be considered self-employed and it will be up to them to pay all of those taxes themselves.”

Finger further said that some NVFC state associations have also expressed concern that formally designating volunteer firefighters as independent contractors rather than employees could jeopardize their ability to qualify for worker’s compensation.