Working Yourself Out of a Job

 

Do you have too many plates spinning? Do you wear too many hats in running your homeschool program? Jamie Buckland, a homeschool leader from West Virginia started Appalachia Classical Academy and knows where you are coming from! In this podcast (17 minutes) Jamie explains to host Carol Topp how she is working herself out of a job.

Some of her advice includes:

  • Listen to your staff (employees or volunteers)
  • Give opportunity for feedback
  • Welcome correction and be open
  • Let them own it. This can apply to hired teacher, volunteers or board members
  • Trust the process and your people

 

Carol and Jamie both belong to a Facebook group for homeschool leaders called I Am a Homeschool Group Leader Facebook Group. It is a closed group (meaning you have to request to join) of 600+ homeschool leaders from across the USA. You can join us here: https://www.facebook.com/groups/72534255742/

 

Jamie is the owner of Classical Program Consultant a consulting service for homeschool leaders interested in launching a classical homeschool program. Her website is JamieBuckland.net.

 

Are you interested in starting a homeschool program like Jamie described? Jamie and Carol teamed up to give a webinar on the ABCs of Starting an Academic Homeschool Program.

You can benefit from their combined knowledge in this webinar. http://homeschoolcpa.com/how-to-start-an-academic-homeschool-program/

 

 

 

 

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Should You Pay Homeschool Teachers

 

Should your homeschool program pay teachers? Jamie Buckland, a homeschool leader from West Virginia started Appalachia Classical Academy and pays her teachers as employees. How and why would she do that? This podcast (19 minutes) will give you something to think about and consider for your homeschool program.

Jamie explains to host Carol Topp how she started her classical homeschool program including:

  • How she received advice from other homeschool leaders
  • Why her program charges tuition
  • Why she pays teachers as employees
  • The benefits of having employees
  • The difficulties of using volunteers

Carol and Jamie both belong to a Facebook group for homeschool leaders called I Am a Homeschool Group Leader Facebook Group. It is a closed group (meaning you have to request to join) of 600+ homeschool leaders from across the USA. You can join us here: https://www.facebook.com/groups/72534255742/

 

Jamie is the owner of Classical Program Consultant a consulting service for homeschool leaders interested in launching a classical homeschool program. Her website is JamieBuckland.net.

Are you interested in starting a homeschool program like Jamie described? Jamie and Carol teamed up to give a webinar on the ABCs of Starting an Academic Homeschool Program. You can benefit from their combined knowledge in this webinar (and several extra resources are included as well). http://homeschoolcpa.com/how-to-start-an-academic-homeschool-program/

 

In the podcast Carol mentioned …

In the podcast Jamie mentioned paying teachers or tutors as employees. My book, Paying Workers in a Homeschool Organization has more information about paying Independent Contractors and employees.

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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Top tax mistakes homeschool business owners make

I’ve talked to a lot of homeschool (for-profit) program directors over the past few years. These people have a huge heart for homeschooling, but many do not understand that when they start their programs, they began operating a business. They don’t see themselves as business owners (but they are!), and so they neglect getting educated about running a business and make a lot of mistakes.

Here are the top tax mistakes I see homeschool for-profit directors make:

  1. Giving themselves a 1099-MISC.
  2. Not understand that they are business owners.
  3. Paying tutors as Independent Contractors but treat them as employees.
  4. Not understanding their tax obligations.
  5. Not being prepared for self-employment tax.
  6. Not being aware of potential penalties for worker misclassification.
  7. Not keeping good records.
  8. Not seeking professional advice before signing an agreement or launching a program.
  9. Not getting tax advice.
  10. Asking Independent Contractors or employees to volunteer their time. That is Illegal in most states.
  11. Not realizing fundraisers are taxable income.
  12. Thinking they can form a nonprofit by filing a piece of paper but not forming a board or drafting bylaws.

I explain a lot of these tax mistakes in my webinar on Tax Preparation for Homeschool Business Owners. It should be a lot of help to for-profit directors, tutors, co-op teachers and other homeschool business owners! For details visit HomeschoolCPA.com/HSBIZTAXES

 

Additionally my book on  Paying Workers in a Homeschool Organization  explains in detail why tutors should be paid as employees and the risk a homeschool business owner is taking if she pays her teachers or tutors as Independent Contractors.

 

I’m not trying to scare anyone!  Sorry if I did, but maybe it will compel you to change your actions.

I’m not trying to talk you out of being a homeschool business owner, director of a for-profit program, or tutor if you love it.

But I am trying to help you stay out of trouble with the IRS and your state government.

The last thing I want is an audit of homeschool programs or businesses by the IRS or state governments! No one wants the reputation of homeschooling tainted in the eyes of our government. We don’t need that!

 

Carol Topp, CPA

HomeschoolCPA.com

Helping homeschool leaders

How does the IRS prove my homeschool group’s tutor should be an employee?

 

D. is a leader of a homeschool program, Classical Conversations, who asked me about the worker status of tutors in her program: Should they be employees or Independent Contractors? This question applies to many homeschool groups, not just Classical Conversations.

What evidence would the IRS use to prove an “employee” was “treated” wrong (i.e., misclassified as an Independent Contractor when they should be an employee)? If it’s how much freedom the tutor felt they had, I am confused.

If I hire a independent contractor to paint my walls do I not have full rights to specify how, what color, the time frame I need it done, etc? How can this truly be an issued PROVED by IRS?

-D.
(edited for clarity and spelling)

 

D.,

Let me clear up something.

The IRS rulings, decisions and determinations on worker status are based on common law, not scientific facts.

Common law is the body of law derived from custom and judicial precedent rather than statutes. Common law (also known as judicial precedent or judge-made law, or case law) is that body of law derived from judicial decisions of courts (Wikipedia definition https://en.wikipedia.org/wiki/Common_law)

The common-law system is used in all the states of the United States.

Common law and the IRS does not use the word “prove” as used in science. Instead judges and the IRS make judgements or determinations. Application of IRS regulations and determinations is not science, it’s law and that’s a different mindset.

Things cannot be “proven” in law like they can in science.

Under a common-law system, disputes are settled through an adversarial exchange of arguments and evidence. Both parties present their cases before a neutral fact finder, either a judge or a jury. The judge or jury evaluates the evidence, applies the appropriate law to the facts, and renders a judgment in favor of one of the parties. Following the decision, either party may appeal the decision to a higher court. Appellate courts in a common-law system may review only findings of law, not determinations of fact. Source: https://legal-dictionary.thefreedictionary.com/common+law

I’ve written several blog posts on the factors (or “evidence”) that the IRS considers in making a worker determination. Here’s one: Behavior Control of an Independent Contractor

Behavioral Control, which you mentioned in your question, is only one of the many factors to be considered.

The IRS says,

“Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.”

So citing an Independent Contractor painting your walls is not relevant in determining worker status of a teacher in a homeschool program or Classical Conversations group. They are very different situations.

A better comparison is an adjunct instructor at a local college. The IRS has several rulings about the worker status of college instructors. There have been several court cases involving instructors in an education setting. Reading these court cases and IRS rulings and determinations have led me to the conclusion:

Because instruction is a fundamental component of a homeschool organization, instructors, tutors and teachers should be treated as employees because the homeschool group will always exert control over these workers. (from Paying Workers in a Homeschool Organization by Carol Topp, CPA)

 

If you want more details, my book Paying Workers in a Homeschool Organization will be a big help.

I also offer a Worker Determination service to help decide if your tutors are misclassified as Independent Contractor  when they should be paid as employees.
Carol Topp, CPA

Can homeschool groups give free tuition to teachers like private schools?

I taught at a private school before I started homeschooling and I received free tuition for my children. Now I teach at a homeschool program. Can homeschool groups give free or reduced tuition as a fringe benefit like private schools?

 

Maybe!

You’re talking about what the US Tax Code calls “Qualified tuition reduction.”

The United States Tax Code, or 26 U.S.C. § 117(d) has some good news:
 In General. – Gross income shall not include any qualified tuition reduction.
“qualified tuition reduction” means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii)

 

In plain English that means a school may provide its employees with tuition breaks, or cash grants for payment of tuition, without that benefit being considered taxable income to the employee. Good news for school employees!

But notice a few important words: employee and school

Are you an employee of the homeschool program?

If so, keep reading. But if you are an Independent Contractor, you cannot get tax-free tuition reduction benefits.

Is the homeschool program you work for as an employee a “school”?

The US Tax Code defines a school in section 170(b)(1)(A)(ii):

 An educational organization is described in section 170(b)(1)(A)(ii) if its primary function is the presentation of formal instruction and it normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. The term includes institutions such as primary, secondary, preparatory, or high schools, and colleges and universities. It includes Federal, State, and other public-supported schools which otherwise come within the definition.

 

One aspect of a school is a “regular faculty,” which the IRS defines as

“qualified teachers instruct the students, and the same teachers do so on a recurrent basis.” 

Source: Internal Revenue Manual viewed http://www.irs.gov/irm/part7/irm_07-026-002.html#d0e549 on 5/11/15.

And by “qualified” the IRS means:

“certifications by the appropriate state authority or successful completion of required training.” 

Source: Instructions for Form 1023

Hmmm…

…regular faculty…regularly enrolled student body…qualified teachers…recurrent basis…teacher certifications…

Do those words used to definition a “school” apply to your homeschool program?

Maybe. Or maybe not. It might be hard to tell what the IRS meant since this part of the US Tax Code was written long before anyone thought of homeschool programs employing teachers.

Here’s my concern: If a homeschool program fits the IRS and US Tax Code definition of “school” so that its employees can get tax-free fringe benefits, is that homeschool program also a school in the eyes of its state laws regarding private schools? And are the students then attending a school and not really legally homeschooling?

Additionally, since states regulate education in the USA, your state’s definition of school may be VERY different from the US Tax Code’s definition.

It gets confusing. Very confusing. I’m a pretty conservative CPA and don’t like advising my clients unless things are pretty clearly stated in the tax code.

I also don’t want homeschool programs to be treated as schools or to even call themselves schools. I’m concerned that if homeschool programs call themselves “schools” the state may start imposing all the rules that schools must follow onto independent homeschool programs. That will stifle creativity, educational freedom, add a paperwork and reporting burden, and may end up restricting our homeschool freedoms.

It’s just not worth it!

My advice: Avoid attempting to fit the US Tax Code definition of “school.” Avoid even calling your homeschool program a school with both the IRS and with your state. Maintain homeschooling freedom even if it means you cannot offer your employees tax-free fringe benefits of “qualified tuition reduction.”

You may decide differently from what I wrote above. You may decide your homeschool program is a “school” by the IRS and US Tax Code definition. But if you do, please, please get a legal opinion on your organization’s status as a school from a qualified attorney experienced in educational institutions and get it in writing. Yes, you’ll have to pay for it, but it will be your defense if your State Board of Education wants to regulate your homeschool program!

 

Carol Topp, CPA

Summer reading for homeschool leaders: Paying Workers in a Homeschool Organization

Summer is a great time for homeschool leaders to catch up on some reading. I’m highlighting a book each week of summer and this week I’m spotlighting,

 

This book began in 2009 as a 20 page ebook. Homeschooling has changed a lot in the past 9 years and homeschool leaders are asking a lot of questions about paying workers. The book grew from 20 to 130 pages!
I expanded it in 2016 and then it needed an update in late 2017!
 

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.

 Table of Contents
Chapter 1: Can You Pay a Volunteer?Chapter 2: Paying Board Members and Other LeadersChapter 3: Employee or Independent Contractor? Worker ClassificationChapter 4: Guidelines for Hiring Independent Contractors

Chapter 5: Tax Forms for Independent Contractors

Chapter 6: Payroll Taxes for Employers

Chapter 7: Tax Forms for Employers

Chapter 8: Sample Agreements

Chapter 9: Resources

Who should read this book?
  • Anyone running a homeschool organization that pays workers of any kind.
  • Anyone who wonders is a volunteer be paid?
  • Anyone who has ever asked,”Should a worker be treated as an employee or independent contractor?”
  • Anyone who gives payments or significant discounts to board members or volunteers.
 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

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 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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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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