Recording scholarships in homeschool group bookkeeping

 
Hi Carol,

How are scholarships recorded in our homeschool co-op’s bookkeeping? We charge an amount for classes but would like to provide a scholarship and return the full amount of tuition or provide a partial scholarship back to the family. For example, we collect the full tuition payment due but then write a check with a certain scholarship amount back to that same family. Is that considered simply as an expense?

Thank you so much!
Sharon

 

Sharon,

What you call a scholarship is really a tuition discount.

The best way to handle this is to give the discount BEFORE the family pays anything. Then the payment is recorded as income (although smaller income than originally budgeted).

If instead you wish to return some of the tuition a family pays, then you record it as a reduction income. We accountants call it a “contra-income” account. Sort of a negative income account. It’s not an expense; it’s a reduction in income.

Something like this:

Income

Tuition Payments: $5,000

Tuition reduction to needy family: ($500) numbers in parentheses are subtraction or negative numbers

Total Tuition Collected: $4,500

So, it’s not recorded as an expense, even if you write a check. It’s recorded as a contra-income (or a reduction in income) transaction.

I cover this topic and many more in my book, Money Management in a Homeschool Organization. You might find it helpful.

Carol Topp, CPA

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Returning homeschool co-op supplies to parents

Carol,
How should our homeschool co-op should handle classes where there are nonconsumable items purchased?  We had a class where Lego kits were purchased for a class.  Students shared kits and we charged a small fee.  Now parents think they should get half of the kits or that future classes should have to pay for the kits and they receive a credit each time.
We have never done that with any classes in the past.  It has always just become property of the co-op.  It sounds like it would be a bookkeeping nightmare.
Thanks for your input,
Becky  in KY

Becky,

You’re right, tracking the LEGO kits sound like a bookkeeping nightmare.  I like to keep things simple but as fair as possible.

We had a similar situation in my homeschool co-op with Spanish books.  The teacher bought a curriculum to use and was planning on spreading out the cost of the teacher manuals and CDs over two years of students. It took some guess work to figure out how many students she would have this year as well as future years.  In the end we decided  that this year’s students would end up paying for a portion of the teachers books and CDs.  The rest of the cost was absorbed by the co-op as a whole. The co-op then owned the teacher books and CDs. Future Spanish classes were charged a small supply fee so that the co-op could recoup the cost of the teachers books and CDs.

I think the co-op should own non consumables, not the individual parents. Sounds like that’s how you have done it in the past. Parents pay a supply fee, but are not entitled to the equipment afterward nor a credit from future students.

So maybe instead of charging the current students full price for nonconsumables, your co-op could try to save up some money over a few years and purchase nonconsumable equipment that will be owned by the co-op. Or have a fundraiser to buy the equipment.

Carol Topp, CPA

Starting a Homeschool Co-op with a Friend

 

Is it a good idea to start a homeschool co-op with a friend?

Carol Topp, the author of  Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out explains the pitfalls to avoid when starting a co-op with a friend.

Listen to the podcast (10 minutes)

FEATURED PRODUCT from HomeschoolCPA:

Homeschool Co-ops:  How to Start Them, Run Them, and Not Burn Out

Have you ever thought about starting a homeschool co-op? Are you afraid it will be too much work? Do you think you’ll have to do it all by yourself? Starting a homeschool co-op can be easy! This book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out will give you ideas, inspiration, tips, wisdom and the tools you need to start a homeschool co-op, run it and not burn out!

Click Here to request more information!

Homeschool or microschool?

I have been a teacher at a small private Christian School for many years. I have been asked by 15 families to homeschool their children, beginning in the fall. I have agreed. I purchased your books and read them (so helpful!!) I have done quite a bit of work already, but after filling out half of the 501(c)(3) form, have decided that I really want to make sure this is all done right and am requesting your help.
-S

 

Dear S,

Homeschooling the children from 15 families is not really homeschooling. Perhaps forming a microschool be a better option.

What’s a microschool?

According to Meridian Learning, a resource and advocacy organization for grassroots micro-schools,

a micro school is a purposely small school led by a trained professional and focused on meaningful, sustainable, whole student learning.

Microschools are also called the modern-day one-room schoolroom.

Microschools are not the same as homeschool co-ops, tutorials or programs. Micro schools are registered schools in their states and meet the compulsory attendance requirements of the state. Instead, homeschool programs supplement the main teacher, the parent, with classes and extra curricular activities, but the students are homeschooled under their state laws for homeschooling.

It’s a lot of work to set up a microschool so learn more about starting a running a micro school at Meridian Learning. Meridian will be hosting virtual training sessions this summer (2017) on topics such as:

  • Teacherpreneur
  • How to Start a Microschool
  • Montessori for Business

I will be presenting information at the Teacherpreneur 101 and How to Start a Microschool classes.

Also, please visit this Facebook page on Grassroots Microschools to meet other people running microschools.

I’m committed to helping homeschool leaders, but sometimes other options may work better for some people. I hope S. finds a program that meets the needs of the students and parents.

Carol Topp, CPA

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Homeschool Treasurers: Do this before giving your board a financial statement

Homeschool treasurers: before you prepare a financial statement for your board meeting you should reconcile your bank account!

Why is reconciling bank accounts so important?

Vickey Richardson of FreeChurchAccounting.com explains,

 I have discovered with my bookkeeping business that reconciling accounts are not very high on some organization’s to-do list. When accounts are not reconciled … financial statements are usually NOT accurate.

REMEMBER…before generating your financial statements, there is a process you should go through to ensure the accounting reports you give your pastor, treasurer, or governing council are accurate and complete.

One of the most important steps is the bank reconciliation!

See how to reconcile your bank account and additional steps you should take BEFORE you start on your monthly, quarterly, or annual reporting …

Bank Reconciliation First then Financial Statements

(click for Vickey’s detailed steps )

I completely agree with Vickey. When I see regular bank reconciliations, the financial statements are almost always correct. When a organization does not reconcile their accounts, the financial statements are usually a mess.

Vickey also reminds us that credit card statements need to be reconciled too! And so do PayPal accounts. A credit card or PayPal account is really just a type of bank account with inflows and outflows. So reconcile them monthly as well.

 

Carol Topp, CPA

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Creative Ways to Run Your Homeschool Co-op Without Employees

So you really don’t want your homeschool co-op to hire teachers as employees, but how can you run your group without them? Carol Topp, the HomeschoolCPA , offers a few creative ways to run a homeschool co-op without hiring employees or dealing with payroll.

Listen to the podcast.

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.

Click Here to request more information!

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Can my homeschool group collect money now that’s for next year?

 

Many homeschool groups collect deposits in the spring for next fall’s programs. This helps with determining how many families will be returning. But how should these early deposits be recorded in a homeschool group’s bookkeeping? Carol Topp, CPA the HomeschoolCPA offers some ideas.

 

Listen to the podcast

In the podcast Carol mentioned a handout that explains how to record early deposits in accounting software like QuickBooks.

Here it is: Deferred Revenue in QuickBoooks (pdf)

Do you have more questions about managing the money in your homeschool organization?

MONEY MANAGEMENT FOR HOMESCHOOL ORGANIZATIONS: A GUIDE FOR TREASURERS

  • Does your homeschool group manage their money well?
  • Do you have a budget and know where the money is spent?
  • Do you know how to prevent fraud?

This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.

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Is there a penalty for misclassifying my homeschool group’s workers?

Is there a penalty for misclassifying my homeschool group’s workers?

The IRS imposes strict penalties on an employer who treats workers as Independent Contractors when they should be employees. These penalties have put homeschool businesses and nonprofits out of business. Carol Topp, CPA discusses this topic and some programs the IRS has to avoid crippling penalties.

Listen to the podcast 

Worker Classification Consultation

  • Is your homeschool teacher an employee or independent contractor?
  • Should your homeschool co-op director be paid as an employee?
  • How hard is it to set up a payroll system?
  • What happens if my homeschool group misclassifies a worker? Are their penalties?

Worker classification can be a confusing topic.

My book Paying Workers in a Homeschool Organization can help clear a lot of confusion, but perhaps you want to discuss your particular situation in a private, individual phone consultation.

I offer phone consultations to help you determine if your homeschool organization’s workers are employee or independent contractors. The phone call will be followed up with an email containing a fact-based determination and information to help you take the next steps.

Click Here to request more information!

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Is My Homeschool Co-op Teacher an Employee or Independent Contractor?

Is My Homeschool Co-op Teacher an Employee or Independent Contractor?

Should your homeschool co-op teacher be classified as an employee or an Independent Contractor? What’s the difference and how do you make the decision? Carol Topp, CPA, the HomeschoolCPA, sheds light onto this confusing topic and tells you how she determines if a co-op teacher is an employee or Independent Contractor.

Listen to the podcast

Worker Classification Consultation

  • Is your homeschool teacher an employee or independent contractor?
  • Should your homeschool co-op director be paid as an employee?
  • How hard is it to set up a payroll system?
  • What happens if my homeschool group misclassifies a worker? Are their penalties?

Worker classification can be a confusing topic.

My book Paying Workers in a Homeschool Organization can help clear a lot of confusion, but perhaps you want to discuss your particular situation in a private, individual phone consultation.

I offer phone consultations to help you determine if your homeschool organization’s workers are employee or independent contractors. The phone call will be followed up with an email containing a fact-based determination and information to help you take the next steps.

Click Here to request more information!

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Can my landlord get a tax deduction for the free rent he gives us?

I have a few questions for you about a tax deduction for our “landlord.” We just received 501(c)(3) tax exempt status form the IRS. Does this mean that our landlord can claim a deduction the reduced rent she gave us?  RW

 

Dear RW,

Donations of cash or physical goods to your organization are tax deductible charitable donations.  But donations of services or use of leased property is not a tax deduction.

If your landlord gave your homeschool organization free or reduced rent, that is not a tax deductible donation for the landlord. Sorry.

Here are some articles that explain the IRS rules on donating leased space.
Can landlords take a tax-deduction for the donation of leased space?

When a property owner transfers title to a charity of all or part of real property, the owner can generally take a tax deduction for the gift.  However, offering a charity leased space for free or at a reduced rate is a not a gift of an ownership interest and is not considered deductible by the IRS.

Landlords do a good deed by donating leased space to a charity but they are not permitted to receive a tax benefit for their action.

Tax treatment of the provision of rent free

For this reason, donations of services or loans of property to a charity do not qualify as gifts because they do not transfer a property interest to the charity. They simply allow the charity to use the property of the donor, or to benefit from the donor’s services, free of charge.

Here’s the official word from the IRS from Revenue Ruling 70-477.

“a contribution, made after July 31, 1969, to a charitable organization of the right to use property is treated as a contribution of less than the entire interest in the property and does not give rise to a deduction.”

In other words, if someone donates a building (i.e. “the entire interest in the property” ) to a charity, it is a tax deductible donation. But if the contribution is the right to use the property, then there is no tax deductible donation.

Carol Topp, CPA

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