The Internal Revenue Service wants teachers to know that a recent tax law change won't affect the way their tax is paid in the upcoming school year.
The change, involving deferred compensation rules, has been prompting anxious calls from teachers who are worried they will face stiff penalties if they don't make an immediate decision about their pay. The issue involves an October 2004 tax law change for which the IRS and the Treasury Department issued final rules in April of this year.
Under the law, when teachers and other school district employees receive an "annualization election," which allows them to choose between getting paid over the course of just the school year or being paid over the entire 12 months, they are deferring part of their income from one year to the next if they choose the 12-month period.
However, the IRS is telling teachers that the new rules do not require school districts to offer the annualization election. If they haven't been offering the election already, they don't have to start doing so. Still, if a school district does offer the annualization election, it will have to make some changes in its procedures.
Districts will have some extra time to make the changes because the new rules don't go into effect for school years beginning before Jan. 1, 2008. The IRS also said it would not impose additional taxes if a school district and its employees fail to meet the requirements for school years beginning before 2008.
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