Can a homeschool co-op invoice the parents on behalf of a teacher?

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Hi Carol,

I recently found your website and have found it very useful.  I am waiting for your book Paying Workers in a Homeschool Organization to be delivered this week to me.

We are trying to figure out how to invoice families for their student’s classes.  I collect the checks each month from the families and then disperse them to the teachers. I started using QuickBooks to send invoices, but since the money goes to the teachers, I don’t enter any money received which throws off our accounting records.  Is there a way to make QuickBooks work for this?

I did find where you suggested to have the teacher’s collect the money themselves, but is there a way we can still do the invoicing?

Thank you,

Kari

Kari,

I hope the Paying Workers book is helpful.

Since your organization is sending out the invoices and your organization collects the money from the parents, then the money belongs to your organization and needs to be recorded as revenues in QuickBooks (use the Customers>Receive Payments). When the teachers get paid, it is recorded as an expense in QuickBooks probably using an expense account such as Contract Labor or Wages.

By the way, you need to determine if your teachers are employees or independent contractors. I can help you decide.

You asked, “I did find where you suggested to have the teacher’s collect the money themselves, but is there a way we can still do the invoicing?”

Nope. If your organization sends the invoice, that means that your organization, not the teacher, expects to be paid the money.

If your organization wants the teachers to be paid directly by the parents, then your homeschool group has to stay out of the relationship.

You group should not invoice the parents, tell the teacher what she can charge, and not collect the checks from the parents.

The teacher must handle the money collection from parents all by herself. She is in business for herself and your homeschool organization should stay out of the money she collects from the parents.

I hope that helps,

Carol Topp, CPA

Tax Form 1099-MISC to Independent Contractors

Did your homeschool organization pay an Independent Contractor more than $600 in 2017? Then you need to give them a 1099-MISC form.

Accountant Carol Topp, the Homeschool CPA, explains how to fill out the form, how to get the form, and tips for filing it correctly.

In the podcast Carol mentioned using a 1099-MISC filing service like Yearli.com. Email Carol@HomeschoolCPA.com for a discount code worth  15% of their prices.

 

Featured resource

Are you paying workers in your homeschool organization? Can a volunteer be paid? Should a worker be treated as an employee or independent contractor? Do you know the difference?

Homeschool leader and CPA, Carol Topp, has the answers to your questions in her book Paying Workers in a Homeschool Organization.

This 130 page book covers paying workers as employees or independent contractors. There are alos chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

Click Here to request more information!

Carol Topp, CPA

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Why I think most homeschool teachers should be paid as employees

 

I state pretty clearly in my book Paying Workers in a Homeschool Organization (3rd edition) that teachers in a homeschool program should be treated as employees not Independent Contractors.

I’ve gotten some push back on my opinion.  I understand why. No one likes the expense and paperwork involved in employees, especially when they are  hiring part-time and seasonal employees.


But my goal is to keep homeschool organizations and their leaders out of trouble with the IRS and state governments. We don’t need a target on our backs! So I’m going to stick to my opinion because I think it’s correct and best protects homeschool leaders.


So let me explain why I have the opinion I do:

The IRS guidelines on worker classification are where I start. The IRS has the old 20-factor test and the newer 3 factor common law rules. I wrote about both of these guidelines extensively in Paying Workers.

But, I base my opinion on more than the IRS guidelines. I base it on hours of reading IRS rulings and tax court cases and my understanding of how homeschool programs operate.

I also base my opinion on this statement given by Bertrand M Harding, an attorney who specializes in nonprofit law. In his book The Tax Law of Colleges and Universities (Third Edition, Wiley, 2008) he writes,

“In at least one audit, the IRS agents asserted that, because instruction is such a basic and fundamental component of a college or university*, individuals who are hired to provide instruction should always be treated as employees because the school is so interested and involved in what they do that it will always exercise significant direction and control over their activities.” (emphasis added)

* The IRS was specifically addressing instructors at colleges and universities, but I believe their conclusion applies to public schools, private schools, and homeschool programs as well.

Some homeschool leaders differ with my opinion. I believe they are putting themselves at risk and I caution them about IRS penalties, etc. The Landry Academy IRS problems was a wake up call of how bad it can get. Although I don’t know the particular details on the financial penalties faced by Landry Academy, it was significant enough that the business declared bankruptcy.

I released a podcast on creative ways that homeschool co-ops can hire teachers without paying them as employees. Creative Ways to Run Your Co-op Without Employees

I hope that helps,

Carol Topp, CPA
HomeschoolCPA.com

Can a homeschool co-op have independent contractors and follow the IRS guidelines?

Hi Carol!

Are you aware of any homeschool co-ops/tutorials that have hired teachers as independent contractors and do it in a way that follows the IRS guidelines?
Thanks!
Lauren

Lauren,

I am aware of a lot of homeschool co-op and tutorials that pay teachers as Independent Contractors. Are they following the IRS rules?

Maybe. It depends. Read on…

After a lot of research into IRS rulings and US Tax Court cases concerning the classification of teachers (usually college professors), I learned that one of the factors that weighed heavily in the decision (employee or Independent Contractor) was:

Does the worker provide the primary activity of the organization.

This was really important in the IRS and tax court decisions.

Case 1: employees: I spoke to one homeschool leader who ran a homeschool tutorial program with 12 teachers, all paid instructors. There were no volunteer teachers. Those teachers are providing the key activity of the business. Without them, there would be no homeschool tutorial program. Those teachers are employees.

Case 2: Independent Contractor: On the other hand, I spoke to a homeschool co-op leader who had 15 parents volunteering as teachers and one paid outside person to teach one class. This person was very independent (she had an established tutoring business, picked her own curriculum, received no training or benefits from the co-op, brought in her own supplies, and many other factors).  She was treated as an Independent Contractor. Her services were not the key activity of the co-op; what the volunteer parents provided was the key activity of the co-op. The co-op could continue to exist if that Independent Contractor teacher was unavailable.
This co-op did everything they could to avoid controlling their Independent Contractor teacher. They also has a written agreement and she invoiced the co-op for her services.

But just to be sure, they requested I write a letter clearly stating the facts of their situation and my determination that the outside teacher was correctly classified as an Independent Contractor. It’s called a comfort letter.

My letter, as the opinion of a tax professional licensed to practice before the IRS, can serve as a reasonable basis if the IRS ever questions the homeschool co-op. This reasonable basis will help the homeschool co-op avoid any penalties and back taxes from the IRS.

See how the facts and circumstances of each case can be different? There is not bright line test in worker classification. The determination if your homeschool program teacher is an employee or Independent Contractor depends on the facts and circumstances of each case.

If you would like help determining your teacher’s status or have me write a “comfort” letter, contact me. We’ll set up a phone call where I ask you a bunch of questions. The phone call will be followed up with an email containing a fact-based determination and information to help you take the next steps.

My book Paying Workers in a Homeschool Organization is a great place to start to understand how to properly classify your workers.

I released a podcast on creative ways that homeschool co-ops hire teachers without paying them as employees. It runs about 9 minutes long.

Creative Ways to Run Your Co-op Without Employees

I hope that helps,

Carol Topp, CPA
HomeschoolCPA.com
Helping homeschool leaders

Update to the Paying Workers Book

 

Paying Workers in a Homeschool Organization was released only a year ago, but it already needed an update.

Lots of things happened in the homeschool world that meant author Carol Topp, Homeschool CPA, needed to release a new edition.

Find out what happened and what has changed in the book.

For  the document of changes go to Changes to Paying Workers-3rd edition.docx

 

Featured resource

Are you paying workers in your homeschool organization? Can a volunteer be paid? Should a worker be treated as an employee or independent contractor? Do you know the difference?

Homeschool leader and CPA, Carol Topp, has the answers to your questions in her book Paying Workers in a Homeschool Organization.

This 130 page book covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

Click Here for more information!

 

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Update to Paying Workers in a Homeschool Organization

 

I released the 2nd edition of my book Paying Workers in a Homeschool Organization in November 2016, 11 months  ago.

Now, less than a year later, it needs an update. Several events occurred that required me to research the issue of worker classification for homeschool organizations. As a result of my research, I have made several changes to the book.

The update is significant enough that I’m calling it the 3rd edition!

 

The paperback book will be unavailable for a short time while it is getting updated. I expect the paperback and Kindle versions to be ready by October 15, 2017.

Update (October 13, 2017): The paperback version has not been updated. The Kindle update should be completed before November 1, 2017.

The ebook version (in pdf) is available now.

Wonder what changed? Or maybe you bought an earlier version of the book and you want to know what’s different.

I created a document explaining what was added or eliminated from the book between the 2nd and 3rd editions. I clarified when a teacher should be paid as an employee and added some additional Sample Agreements including an employment agreement.

Summary of Changes to Paying Workers 3rd edition (click to open the file).

Carol Topp, CPA

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Paying Volunteers Q&A with Homeschool Leaders

 

Can you pay a volunteer?

This short podcast episode (15minutes) from Carol Topp, the HomeschoolCPA, is the last excerpt from the Homeschool Leaders Retreat held in Indiana.

Carol Topp discusses how to pay (or thank) a volunteer and paying teachers in a homeschool co-op without causing tax problems for your volunteers (or your church host).

 

I mentioned my book

Paying Workers in a Homeschool Organization

Are you paying workers in your homeschool organization?

  • Can a volunteer be paid?
  • Should a worker be treated as an employee or independent contractor?
  • Do you know the difference?

Homeschool leader and CPA, Carol Topp, has the answers to your questions in her book Paying Workers in a Homeschool Organization.

This 130 page book covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

 

Carol Topp, CPA

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Background checks for homeschool organizations

A homeschool leader on the Homeschool-Life Leaders Forum asked,

Could you share what companies you use to do background checks for your organization?

 

Here are some of the companies that homeschool groups use for doing background checks on employees and volunteers:

Protectmyministry.com

We have used ClearStar.net for several years. They charge $7.95 for a basic criminal background check. Our members can fill in their own information, so we don’t have to deal with paperwork and shredding personal information.

We use Federal Background Services. very reasonable and efficient

My co-op uses SecureSearchPro.com. They charge us about $14/check. They customized our background search to fit our specific needs. They bill us on a monthly basis. I really like them, they are easy to use, members fill out an online form so I never have to gather their personal information.

 

Many states now require background checks on any individuals working with children. You church host may require background checks as well. So the companies mentioned above may be very helpful to you in running your homeschool programs.

 

Carol Topp, CPA

HomeschoolCPA.com

Helping homeschool leaders

Need advice when hiring your first employee? Discount program available to nonprofits.

Hiring employees can seem like a taunting task. My book Paying Workers in a Homeschool Organization can help a lot, but if you want extra services, consider contacting a service like HR Solutions Partners.

The HR Solutions Partners discount program at TechSoup provides human resources support services to eligible nonprofit organizations, charities, and public libraries throughout the United States.

With minimal experience, you can use HR Solutions Partners services for support in training employees, administering payroll, measuring employee performance, and more.

I’ve not used them, so I cannot vouch for their services, but it can’t hurt to call and talk to them.

Carol Topp, CPA

Paying Workers in a Homeschool Organization covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

$9.95 paperback

$3.99 ebook

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IRS amnestry program for employers (how to avoid penalties for paying workers as Independent Contractors)

You may have heard about the IRS crackdown on misclassifying workers and the penalties that your business or homeschool program could face if  your business is audited by the Internal Revenue Service (IRS). For a true but sad story about the Landry Academy read this.

What can you do to avoid the IRS penalties?

The IRs has a program called the Voluntary Classification Settlement program (VCSP) .

Eva Rosenberg, the Tax Mama, explains the IRS Voluntary Classification Settlement Program in plain, clear English. Just the way your mama would talk to you.

The VCSP (aka the IRS amnesty program) allows employers to avoid the penalties for paying your workers as Independent Contractors when they should have been paid as employees.

IRS Amnesty Program? Yes There IS an Employer Amnesty Program

Eva explains,

For those employers who do apply for the VCSP, the savings can be substantial. For example, take a calculation based on unreported payroll of $625,000 in the prior year. Under the amnesty, the full payment to the IRS would be under $6,600. Without the amnesty, with the IRS looking back for only three years, it would cost the employer over $292,000 (for six years, over $620,000).

I can help you determine if the IRS amnesty program is a good option for your homeschool business or nonprofit organization. Contact me and we can talk about your options.

One homeschool group leader decided to apply for the IRS amnesty program and convert her tutors to employees. She said, “For $145 (her fee to the IRS), I can sleep better at night knowing the IRS won’t audit me or make me pay a penalty.”

Carol Topp, CPA

Helping homeschool leaders

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