Can homeschool teachers be allowed to keep extra money as a donation?

Dollarsinhand

Dear Carol,

I have purchased and am reading your ebook Paying Workers in a Homeschool Organization. Thank you for making this available!

We are a co-operative, so all are teachers are basically volunteers. I do, however, collect on their behalf an estimated class contribution to help them cover costs related to teaching: curriculum, printing handouts and lesson plans, consumables used in class etc. This amount is determined by the teacher, usually $5-10 up to $50 per semester depending on the class. These funds are collected and then dispersed to the instructor at the beginning of the semester. We don’t require receipts or an accounting to be submitted. Any remaining funds are considered a “donation” to the teacher to recognize their time and effort in preparing and teaching the class. Teachers are not required refund monies back to the families.

Most of us feel that this structure is reasonable. However, one member is questioning. Does our policy seem acceptable from a legal position?

Thank you, in advance, for taking the time to answer my questions.

God bless your service,
Rose

Rose,

Thank you for your kind words. I’m glad the book was helpful. It’s been updated since you read it and has grown from a 20 page ebook, to a 130-page paperback.

This statement bothers me greatly, “We don’t require receipts or an accounting to be submitted. Any remaining funds are considered a “donation” to the teacher to recognize their time and effort in preparing and teaching the class.”

When you do not request receipts, you are running what the IRS calls an “non-accountable” plan for reimbursements.

The remaining funds that you let your teachers keep is not a donation, it is a payment for services and is taxable income that needs to be reported to the IRS. Actually, the full amount you give to the teachers is taxable income under a non-accountable plan.

I have written a few blog posts on the topic of paying volunteers, requesting receipts for reimbursements, etc. Please read these:

No receipts for expenses can get you in trouble
and
Should my homeschool co-op be giving any tax forms to our teachers?

In my book Money Management in a Homeschool Organization I discuss how to properly set up an accountable reimbursement plan (Chapter 7).

I hope you will change your practices (i.e set up an accountable plan for reimbursements and start requiring receipts) so that your teachers do not have to report their payments as taxable income.

You may also find my updated version of Paying Workers in a Homeschool Organization helpful.

Carol Topp, CPA

 


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Paying Workers in a Homeschool Organization-2nd edition

$9.95 paperback
130 pages
Copyright 2017
ISBN 978-0-9909579-3-5

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