Is a homeschool co-op teacher an independent contractor if paid by the parents?

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After reading through a bit of your material, we have decided that each family will pay our homeschool co-ops teachers individually. How would we label teachers that are not on a payroll, not volunteers, and not an independent contractor of the co-op?

The way we look at is that we simply provide a space and venue for outside teachers to offer their services. Is this correct? Our group will not provide them with any money. However, the group plans on “negotiating” the per student cost of a class.

Thank you for your insight
Heather

Heather,

Thank you for contacting me.

Teachers that are not your employees are called independent contractors IC), hired by each parent, but not the co-op.

I think you explained the arrangement correctly.

I recommend you have a written statement explaining what the co-op will do and what you will not do for the ICs. Have each teacher sign it. Call it a Memorandum of Understanding (MOU). MOU’s are not legally binding and do not involve an exchange of money. They are different from a contract in that way.

Be careful about too much negotiating with the teachers. You don’t want to give the appearance that they are working for your co-op. You could certainly tell them a typical fee that parents would be willing to pay, but ICs are supposed to bear the risk of doing business which includes setting their price. In other words, help them by offering a suggested range of fees, but do not dictate what they can charge.

 

Cover Money Mgmt HS OrgHave questions about paying teachers in your homeschool co-op? My latest book, Money Management in a Homeschool Organization will help. I devote a chapter to hiring workers.

Order a copy today.

You may also find these two podcasts helpful:

Paying Workers in a Homeschool Organization Part 1

Paying Workers in a Homeschool Organization Part 2

 

Carol Topp, CPA

What can you do when your leader is overly-controlling?

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Does your homeschool group suffer from a dominate leader? She may have founders syndrome.

What can you do when your leader is overly-controlling?

How-matters.org offers this advice for boards:

  1. Understand and take full responsibility for the role of board member. Insist on focused board training to review the roles and responsibilities of a governing board. Undertake a yearly self-evaluation of the board to ensure it is operating effectively.
  2. Once a year, conduct a key exercise: pretend the founder suddenly left the organization. Who will/can quickly step in? Are you sure? What activities are the staff really doing to carry out programs? In the case of non-profits, what grants does the organization have to perform against and report on when? What is the cash flow situation? What stakeholders must be contacted? Where are the files/records?

I really like the idea of pretending your key leader suddenly left. It’s a great idea!

The blog post from How-matters.org offers other terrific suggestions for boards facing a founder who won’t let go.

Author Stephen G. Donshik in an article “The Creator or the Destroyer: Dealing with Founder’s Syndrome”  says it can take a long time, many months, to get a founder to loosen the reins.
It might require many discussions between the parties; it may take months before the founder acknowledges the need for a change in leadership.
What should you do if the founder won’t let go of leadership? Mr Donshik advises,
At some point if the founder is not receptive to planning for a succession of leadership in the organization, the board of directors may have to make a difficult decision to remove the founder from her leadership position when her continuing in the role is destructive to the agency.

I hope your organization will deal with founders syndrome and come out stronger and continue to serve more homeschool families.

Carol Topp, CPA

Does your homeschool leader have founders syndrome?

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Does your homeschoool organization suffer from founders syndrome?

I’ve talked to dozens of homeschool group members who have dominate leaders and they recognize founders syndrome when I describe it.

How-matters.org gives the symptoms of founder’s syndrome:

  • The founder is at the center of all decision-making. Decisions are made quickly, with little input from others. No one really seems to know what’s going on.
  • Planning is not done collectively and any ideas that do not come from the founder usually don’t go very far. People can even become afraid of the founder.
  • The board is recruited by the founder, rather than by the board itself. Often they are friends of the founder, who may have been there from the beginning.
  • The board’s role is to “support” the founder, rather than to lead the organization. They are often a rubber stamp board, having little understanding of the work the organization does.
  • Board and staff members are unable to answer basic questions about the organization, such as the size of the budget, the major funding sources, the extent of the programs, without checking first with the founder.
  • A casual observer would hear a lot of “I, me, my” in conversation. “My staff…” “My organization…” “My vision…” It would also not be unusual to hear the words, “Because that is how we have always done it.”
  • There is resistance to any changes that will result in a (perceived or actual) loss of control. There can be a resistance to new staff or outsiders because they are perceived as a threat. There is a (perceived or actual) fear that the organization will become “something we no longer recognize.”

 Some may ask, “So what’s wrong with that?” And the answer is simple: If the founder is hit by a truck tomorrow, the team or organization is at risk of not being able to continue its programs. All the good work people have done over the years is in danger of ending.

 Sound familiar to you?

Your homeschool leader is a control-freak. She suffers from founders syndrome.  It’s time to recognize it and start dealing with it for the health of your homeschool group.

Carol Topp, CPA

New IRS Form 1023-EZ make applying for tax exempt status easier

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July 1, 2014

Today the IRS announced it has released a new Form 1023-EZ to make applying for 501(c)(3) tax exempt status easier. The press release said:

The Internal Revenue Service today introduced a new, shorter application form, Form 1023-EZ, to help small charities apply for 501(c)(3) tax-exempt status more easily. Most organizations with annual gross receipts of $50,000 or less and assets of $250,000 or less are eligible. See news release for details.

The change will allow the IRS to speed the approval process for smaller groups and free up resources to review applications from larger, more complex organizations while reducing the application backlog.

The new 1023-EZ form must be filed on www.pay.gov, accompanied by a $400 user fee. The instructions include an eligibility checklist that organizations must complete before filing the form.

You can see what the Form 1023-EZ looks like here.

Parts II and IV might be a little confusing. The instructions for this 3 page form is 20 pages long!

If you need assistance filling in the Form 1023, I will be helping homeschool organizations by offering a phone consultation to review your organizing documents for compliance and guide you through the form.

Contact me to arrange a phone consultation to go over your Form 1023-EZ.

Carol Topp, CPA

Church requires homeschool group to have insurance

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Carol,
A local church is requiring us to have insurance to rent their facility.  That has never been needed before.  Do you have any comments about or guidance for us regarding that?  I’m curious about what you’ve seen with other organizations, suggestions for getting short or long term coverage, etc.  Just what you know off the top of your head.
Thanks so much!
Natalie B in Texas

 

Natalie,

I wrote an article on insurance for homeschool groups. There are 3 types in insurance a homeschool group might be interested in buying. Sounds like you need the general liability type.
Insurance for homeschool groups

Some homeschool groups have a hard time finding insurance, but one homeschool leader found a helpful insurance company.

These blog posts I’ve written about insurance will be helpful.
http://homeschoolcpa.com/blog/insurance/

I hope that helps!

Carol Topp, CPA

Homeschool group wishes to grant college scholarships

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Carol,

Our 501(c)(3) non-profit homeschool support organization would like to award a $1000 college scholarship to a graduating senior in our chapter of the Eta Sigma Alpha home school national honor society. The criteria for receiving the scholarship is the student must be a member of our homeschool honor society chapter and be a graduating senior that will be attending college in the fall. The students will be judged on their accomplishments in areas of scholarship, character, service, and leadership.

The plan is that I would donate the $1000 to our 501(c)(3)non-profit home school support organization, which would in turn award the scholarship to a student in our honor society chapter. The scholarship winner would be determined by an independent panel of judges. I would not be one of the judges and I have no children involved in the program.

Are there any hoops we need to jump through to accomplish this?

Janis H in Texas

Janice,
You’re to be commended for establishing a scholarship fund and already having good policies in place.

You should look at your organization’s original application for 501c3 status (Form 1023) to see if included Schedule H Scholarships. If your organization included Schedule H, you’re all set. Award away! :)

If you did not file a Schedule H, then you’ll need to notify the IRS that you are adding a new activity.

According to this IRS webpage, you report changes and additions in your activities on Form 990 or 990EZ.
http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Reporting-Changes-to-IRS

It would be a very good idea to look at the Form 1023 Schedule H (scroll down to page 28) and it’s instructions. From the questions the IRS asks, you get a very good idea of how they think a scholarship fund should be set up. It sounds as if your organization already has in place many of the IRS’s recommendations. Include a paragraph outlining your policies based on Schedule H questions when fling Form 990 or 990EZ.

If your organization does not typically file Form 990 or 990EZ because you are eligible to file the online e-postcard Form 990N (Annual gross revenues less than $50,000), you should file the longer 990EZ for the year you launch the scholarship program.

I hope that helps.

Carol Topp, CPA

How do I know if my organization has lost its tax exempt status?

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Did your nonprofit organization lose your tax exempt status?

What’s this all about?

In 2010, the IRS has begun revoking the tax-exempt status nonprofit organizations that failed to file a Form 990/990EZ or 990N for three years. A large number of these organizations are small nonprofits that were not required to file an annual return (because their gross revenues were $50,000 or less) and didn’t know about the new IRS requirement.

If your organization has not filed any of the 990/990EZ or 990N forms for three years, it is likely your tax exempt status was revoked.

How will I know if my organization has lost its tax-exempt status?

You may have received a letter from the IRS  called a  CP120A.

What if we did not receive a  letter from the IRS?

You may not have not received a letter because your address has changed or you are not in the IRS exempt organizations database. This is true for thousands of tiny organizations or clubs that were not required to file a Form 1023 or 1024 application to be tax exempt.

1. You can search the IRS database here: http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

2. If you don’t find your nonprofit’s name in the database, call the IRS Customer Service for exempt organizations at 877-829-5500. Give them your name and Employer Identification Number (EIN). Call early in the morning ( 7:30 or 8:00 am ET) for shortest wait times.

OK, I think our tax exempt status was revoked! Now what?

I can help. Read more here…

Can’t we just call the IRS and get on the list to file Form 990Ns?

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My leadership team is freaking out. We are one of those groups in the 990N discussion. We got our EIN in June 2010 and opened a checking account in December 2010. We always have under $5,000 pass through our books every year.

We have never called the IRS to be added to the 990N list because of lack of knowledge. You mentioned at the homeschool convention in Cincinnati fixing this problem by filing 20-some odd-pages to be reinstated.

Since we have never called to be on the list in the first place could it be, I pray, as simple for us to just call and get on the list and start filing the 990N form?

Sorry this has upset your leadership team.

Wouldn’t have been nice if the IRS had made it easier to comply when you learn about the 990N?

But unfortunately, they revoked your status automatically after 3 years of failing to file the Form 990N, even though you never officially applied.

Then to make things worse, the IRS requires you to file the 26 page Form 1023 to get reinstated, even though you never had to file that  application form in the first place (because your gross income is under $5,000/year).

Here’s my flowchart of the process to get tax exempt status reinstated.

This has made a lot of work for the IRS and they were back logged to begin with!

Fortunately, the IRS is considering a Form 1023EZ which is only 2-3 pages and a lot simpler to fill out than the longer 26-page Form 1023. They hope to have the Form 1023EZ ready by the summer of 2014.

But I wouldn’t hold my breath. The IRS has received some negative feedback  about their proposed Form 1023EZ, saying it is too simple! I agree that it does not go far enough in helping the IRS separate legitimate nonprofits from scammers. I doubt the Form 1023EZ will be ready by this summer.

But maybe you can wait until the fall and the IRS might have a Form 1023EZ by then.

I find that each homeschool group is unique. Some have to go though the IRS process, some are within the time frame and can get tax exemption reinstated easily. I do provide a phone consultation to help organizations figure out what is best for them.

Contact me to arrange a phone call and give your leadership team some peace of mind.

Carol Topp, CPA

Paying Workers in a Homeschool Organization Part 2 podcast

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Do you pay workers in your homeschool organization?

Do you know what form to to filing with the IRS?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 2 of a 2 part series.

Listen to the podcast

 

Show Notes:

Applying for EIN. Use IRS Form SS-4. Read this helpful article first Getting an EIN from the IRS.

IRS forms to give to independent contractors (IC).

  • Use IRS Form W-9 to collect the IC’s legal name and EIN.
  • Read IRS Pub 15A Employers Supplemental Tax Guide.
  • Give Form 1099MISC to every IC paid more than $600 in a calendar year. Unfortunately Form 1099MISC cannot be printed on your home printer. You must order it from the ITS or buy a set at an office supply store. I use FileTaxes.com to file and mail Form 1099MISC.

IRS forms to give to employees

  • Collect a W-4 and an I-9 (Immigration) from each employee. Get employment forms at IRS.gov
  • Read IRS Pub 15 Employers Tax Guide
  • Give each employee a W-2 at the end of the year. (I use FileTaxes.com to file and mail the W-2′s to the employees)
  • Form 941 or 944 to pay your employer taxes (Social Security and Medicare). Find employment forms at IRS.gov.  I use FileTaxes.com to prepare and file 941/944 or fill in online print and mail.

What to do if you are paid by homeschool organization an receive a 1099MISC

  • File Schedule C Profit or Loss from Business of the Form 1040. List all your income and expenses from being a independent contractor.
  • Pay federal income tax and  self-employment tax (same as Social Security and Medicare for self-employed people) using Schedule SE (attached to your Form 1040.

If you find these forms confusing, consider a private consultation with Carol Topp, the Homeschool CPA. She can help you prepare and file the correct forms.
Carol mentioned a few helpful resources:

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization (short ebook)

Questions and Answers for Homeschool Leaders (ebook)

Money Management in a Homeschool Organization (newly expanded) in paperback or ebook. The Paying Workers ebook is incorporated as a chapter in this book, so you don’t need to purchase both.

Other helpful books and articles for homeschool leaders can be found at HomeschoolCPA.com

 

Be sure to listen to the first part of this podcast (Episode #17) where Carol explains the difference between employees and independent contractors.

How do you find a location for your homeschool co-op?

photo credit: http://www.mcgannconstruction.com/

 

I love the Facebook group I am a homeschool group leader. It’s like as support group for homeschool leaders.

Recently Kate asked,

How do you go about finding a location for your co-op? The church we had in mind wants us to rent the space (about $8000 for the ten month school year) which is not cost effective.

Here are some of the replies she received:

  • Municipal recreation centers
  • Try other churches
  • Public libraries
  • Vets halls, VFW Halls, American Legion Halls
  • Homeowner clubhouses
  • Boys & Girls clubs.  More than one leader commented that their local Boys and Girls Clubs were used by homeschool co-op during the day.
  • Places that offer after school programming. Lots of times they are empty during the day.
  • Public parks with buildings.

What a great list of ideas! I’d never thought of some of them.

Where does your co-op met?