Update on teachers as independent contractors
March 27, 2009
In Is Your Hired Teacher Really an Employee? I mentioned a homeschool group dealing with the IRS over teacher classification as an employee or independent contractor (IC).
They replied to the IRS via a letter stating their case for worker status as an Independent Contractor. They heard back from the IRS and the IRS determined that the teacher was misclassified as an independent contractor and should be reclassified as an employee. The IRS wants $500 in back taxes (at least there are no penalties!) The homeschool organization strongly disagrees and contacted a labor law attorney to help draft a letter back to the IRS.
Update: The IRS issue was settled with the IRS winning the issue. The homeschool organization reclassified all their teachers as employees. There were no penalties to pay to the IRS, but then the State of Ohio audited this homeschool group and has fined them $3,000-$4,000 a year for three years for unpaid unemployment taxes. The State of Ohio sided with the IRS that the workers were employees and the organization should have been paying unemployment taxes on them. Thankfully, the state can only audit back for three years.
The issue brought to light that many (perhaps most) homeschool organizations that hire teachers pay them as independent contractors. Most homeschool groups are small nonprofits without accounting staff to manage the paperwork of withholding and paying employment taxes, creating W-2s, etc. It’s easier to deal with an IC than an employee. But the IRS reminds us the the facts of the situation determine worker status, not the organization’s preference.
Also, most hired homeschool teachers are only teaching about one hour a week and are given a lot of freedom in how to conduct their class. This was all true for my client, but the IRS still determined the teacher was an employee. She even signed a IC agreement three years in a row, so even a contract was not enough evidence for the IRS.
Here’s what I’m doing:
3. Change the way my small co-op pays teachers. The IRS letter stated , “if the worker had been an independent contractor, the parents would have directly paid the worker for the services she provided for their children.” Starting next semester we will have parents pay the hired teachers directly. See Paying teachers in a homeschool co-op to read our story
4. Trying to get out the word to homeschool leaders about the potential problems of worker misclassification and in general the employment laws regarding hiring paid teachers.
5. Encourage homeschool leaders to read my ebook Paying Workers in a Homeschool Organization. It’s only $3.00 and can buy you a lot of peace of mind.
Please pass on this information to homeschool groups that you know hire paid teachers. It doesn’t pay to be ignorant.
Carol Topp, CPA
What's a volunteer worth?
March 26, 2009
Volunteers are worth their weight in gold. Most homeschool organizations are run completely by volunteers who are doing a wonderful service to their community and other homeschooling families. What’s a volunteer worth? Priceless? Independent Sector, a coalition of nonprofits, calculates the worth of an hour of volunteer time.
The estimate for the value of volunteer hour jumped by 74 cents, from $18.77 in 2006 to $19.51 last year, according to Independent Sector (IS), a Washington, D.C.-based coalition of nonprofits and foundations.
Washington, D.C. had the highest hourly value ($30.10) . The top states were all found in the Northeast: New York ($26.18), Connecticut ($25.75), Massachusetts ($24.29) and New Jersey ($23.62).
In all, 10 states eclipsed the $20 value and all but seven had values of more than $15.
Source: http://www.independentsector.org/programs/research/volunteer_time.html
Could your homeschool group survive if you paid your volunteers these wages? Probably not…they are indeed quite valuable.
I am frequently asked if a volunteer can be paid. If you pay a volunteer, she is no longer a volunteer anymore.She is an employees and your homeschool organization will owe employer taxes such as Social Security, Medicare, Unemployment and Worker’s Comp.
I recommend homeschool groups show appreciation though thank you notes, gift certificates, verbal appreciation and praying for your volunteers.
Carol Topp, CPA
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New eBook: HomeWork: Juggling Home, Work, and School Without Losing Your Balance
March 17, 2009
The Old Schoolhouse magazine has just launched a new electronic book on being a work at home, homeschool mom called HomeWork: Juggling Home, Work, and School Without Losing Your Balance
ebook only $12.95
Are you looking to creatively supplement your family’s income?
Would a home business even work for your homeschooling family?
Whether you are. . .
- Considering a new home business endeavor, or already working from home
- Seeking creative ideas, or exploring opportunities that might work for you
- Wondering how to set up a home business
- In need of some inspiration, encouragement, motivation or advice from experienced home’preneurs who’ve been there
- Wondering how others manage homeschooling and homework and continue to smile
. . . this E-Book, HomeWork: Juggling Home, Work, and School Without Losing Your Balance contains the information and support you are looking for!
My friend, Katy, was the project coordinator and asked me to contribute a chapter. My chapter is titled “Keeping Finances Organized in a Work-at-Home Business.”
To see the rest of the topics and a description of the book, click here:
HomeWork ebook
Carol Topp, CPA
who is loving working from home and homeschooling!
The IRS's Word on Fundraising Do's and Don'ts
March 7, 2009
Carol,
My homeschool group does several fund raisers where we divide the proceeds to each family to reduce the parents’ tuition. We have a shoppers reward program and I track how much of a tuition credit each parent earns by using their shoppers reward card. We also let students or parents work off some tuition by volunteering to work a shift at our city’s major league baseball stadium concessions. The team makes a donation to our homeschool group (a 501c3 organization). I’m having a hard time finding information on the IRS website about these types of fund raisers.
Susan in Ohio (paraphrase from a spoken conversation)
Susan,
I’m sorry you found it so difficult to find information about fundraisers like your group is running. Sometimes you have to know the correct language to use in a search. Search on the words “Booster Club” to see what the IRS has said.
Here’s a wonderful link from a lawyer, Harvey Mechanic, that volunteers to answer nonprofit questions. He gets a lot of questions about booster clubs and fund raising like this one in particular: AllExperts NonProfit Law:Booster Clubs
To see all the questions and answers go here: AllExperts NonProfit Law
Mr Mechanic frequently refers readers to an IRS document titled Athletic Booster Clubs: Are They Exempt? He summarizes and edits the IRS document here: Summary of IRS Article on Booster Clubs
Here’s the full text at 14 pages: http://www.irs.gov/pub/irs-tege/eotopica93.pdf
I’ve read this document several times. It is a document that the IRS uses to train their employees. While it addresses athletic booster clubs, the principles apply to school booster clubs also, including homeschool groups that do fund raising.
Finally, Mr Mechanic answers a question about fund raising by working concessions at MLB games here: Working Concessions at MLB Games
I hope that helps. Sorry there’s not one paragraph at the IRS website to point you to! This is a collection of laws, rulings and cases over several years.
Carol Topp, CPA