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Sunday, June 25, 2006

The taxman throws up a yellow card

Daniel Barry for The New York Times
Jay Skelton is president of the Fairfield United
Soccer Association, which has 45 teams that
travel around the state and beyond.

It's Goalkeeper vs. Bookkeeper as I.R.S. Audits Youth Soccer

Published: June 25, 2006

FAIRFIELD, Conn., June 22 — Soccer seemed a simpler game when Jay Skelton coached his eldest son's kindergarten team nine years ago. This was before 5-year-olds went to goalie clinics, before teams took two-week trips to Europe, before the world's most popular game consumed his suburban life.

Jay Skelton is president of the Fairfield United Soccer Association, which has 45 teams that travel around the state and beyond.

Today Mr. Skelton is president of his son's league, the Fairfield United Soccer Association, and he presides over a far more complex enterprise. Its 45 elite teams travel across the state and beyond for tournaments, training rigorously with paid college-level coaches. And its budget has boomed, with the group raising $392,000 in dues in 2004, according to tax returns.

The Internal Revenue Service has taken notice.

For the past two years, the association has been grappling with an I.R.S. audit that found the association failed to withhold taxes for a dozen paid coaches and scores of referees in 2003 and 2004. The I.R.S. assessed the association $334,441 in back taxes and fines, an amount Mr. Skelton says will drive the nonprofit league out of business.

The audit, which became public this month and is now under appeal, was not just a rude awakening for the association. It has raised this deeper, almost theological question relevant to many youth sports clubs across the country: Are they growing too fast for their parent managers to keep up?

"We didn't do anything wrong; we're volunteering to help our kids," said Mr. Skelton, a 46-year-old lawyer from Fairfield. "I'm not Joan of Arc, I'm not Rosa Parks; I'm just trying to get through this without losing my mind."

The Fairfield case — which centers on a dispute over whether coaches and referees are employees or, as the league contends, independent contractors — is not the first time the I.R.S. has fined a nonprofit youth sports league. But the penalty is one of the largest, and it has sent worried sports officials from Connecticut and other states scrambling to review the finer points of the tax code.

"A lot of clubs are going through the same type of audit situations, and they're watching our case to see how it turns out," Mr. Skelton said.

Indeed, youth sports clubs, literally once mom-and-pop operations, have grown so large and sophisticated that they now require payrolls, registrars and 1099 forms. Some boards have hired accountants and lawyers. United States Youth Soccer, a nonprofit umbrella group, even offered a seminar on the use of independent contractors at its national convention in Houston in February, run by an I.R.S. representative.

Soccer may have run afoul of the I.R.S. partly because of its immense growth, from a pickup sport 30 years ago to a national phenomenon today, as judged by the avid interest in the World Cup this month.

In 1974, United States Youth Soccer counted 100,000 players; today it says there are over 3 million. Fairfield United, which had 350 players a decade ago, today has 800. And while many of its coaches were parent volunteers back then, today it pays $2,500 a season to 25 skills coaches.

posted by Steve @ 1:33:00 AM

1:33:00 AM

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