Are patronage dividends paid by worker cooperatives subject to self-employment tax? The IRS took this position with about a dozen employee-members of a worker cooperative about two years ago and then backed down when challenged (without any explanation as to why they took the original position and why they backed down). The IRS has now taken the position again with about a dozen new employee-members (or the same employee-members but for more recent tax years) of the same cooperative. Those cases are currently being contested. So who is right – the IRS agent issuing a report to the employee-member stating that his or her patronage dividend is subject to self employment tax or the IRS employee later conceding that it is not? Unfortunately, there does not appear to currently be a clear answer to this question.