Taxing Police Officer Off-Duty Security Income

Ed note: We are always talking to the Tax Institute about the most common tax questions they get. This one is toward the top of the list.

Many law enforcement officers choose to provide security services to private businesses while they are off-duty. The question that often arises is how is this type of income taxed?

Unfortunately for these officers, numerous court cases have held that police officers are considered to be self-employed when performing theses off-duty jobs. This means the income they receive should be reported on Schedule C of their Form 1040, and is subject to the 15.3% self-employment tax. This is true even though they may be required to wear their uniforms from their day jobs.

For example, in one case police officers were considered to be self-employed at off-duty jobs as security guards for the private employers that paid them, not employees of the police department. This is true even though the police department controlled minimum off-duty pay, required the wearing of police uniform and equipment, and required the officer abide by the police manual and procedures.

It is important to also note that in some areas police officers are not subject to social security taxes on their wages received from their police department employer. This is because they are covered under an alternative state-run retirement program. However, coverage under one of these programs will not exempt an officers income from off-duty jobs from self-employment tax because as indicated previously this income is not being paid as a employee of the department, but rather as an independent contractor for a private third-party.