A new twist on paying homeschool co-op teachers

I frequently advise homeschool co-ops to be careful how they pay teachers.  I think it is best to treat paid teachers as employees or to have the parents in the co-op pay the teachers directly. In general I recommend homeschool co-ops avoid paying teachers as independent contractors from the co-op’s checking account.

See my other posts on the issue of paying teachers in a homeschool co-op

Is Your Hired Teacher Really an Employee?

Update on Teachers as Independent Contractors

JoAnn from Texas told me recently how her co-op pays teachers. It’s a new twist that I like and I believe the IRS would approve also.

The teachers in JoAnn’s homeschool co-op invoice the co-op for their services.

The co-op collects all the money from the families and pays the teachers’ invoices, rent and other necessary expense. Each  teacher creates a bill for the amount the co-op owes him or her for teaching.  The co-op provides 1099MISC forms to any teacher paid over $600 annually.

This makes the role of the teachers as independent contractors, and not as an employees of the co-op, very clear. One of the hallmarks of independent contractors is that they bill for their services and do not receive hourly wages or a salary.

This might be a system your co-op could adopt. Thanks JoAnn for sharing your idea!

My ebook Paying Workers in a Homeschool Organization covers paying workers as employees or independent contractors.  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.

Price: $7.00

Available for immediate download as a pdf file

Click Here to Purchase

Carol Topp, CPA

IRS auditors crackdown on independent contractors

According to CNNMoney, the IRS is going to do random audits of 6,000 companies that use independent contractors.

CNN Money: Auditors Crackdown on Indedendent Contractors

Homeschool organizations might be caught in the web if they are paying teachers as independent contractors.

Here’s what the article states:

(CNNMoney.com) — If your business uses independent contractors, get ready for new scrutiny. Hoping to boost tax revenue, the IRS and many state governments are cracking down on how companies classify their workers.

When employers report wages for independent contractors on IRS form 1099, rather than a W-2, they aren’t required to pay unemployment insurance, worker’s compensation insurance or payroll taxes for them. But the rules governing which workers are genuinely “independent” are strict — and often flouted.

The Internal Revenue Service launched a program last month that will randomly examine 6,000 companies over the next three years for employee misclassifications. The federal government estimates it will raise $7 billion over the next 10 through tighter enforcement.

Should you as a homeschool leader be concerned? Maybe, if your organization has been paying people as independent contractors when they are really employees. How can you tell the difference?

I can help.

Here are some helpful blog posts:

Is Your Hired Teacher Really an Employee?

Update on Teachers as Independent Contractors

I also have a short ebook devoted to the subject of paying workers in a homeschool organization. You can read a sample chapter and the table of contents here.

Cost $7.00

This 20 page ebook is available for immediate download.

I also did a free webinar on the topic in January.  Listen to it here.

HomeschoolCPA’s Workshops

Finally, I do phone consultations to discuss the particulars of your situation.  More information here.

http://homeschoolcpa.com/services/consultation/

You do not need to be afraid of an IRS if you have done some research, reading and are prepared correctly.

Carol Topp, CPA

Paying Workers workshop now available

Homeschool leader, did you pay a volunteer, teacher, leader or worker for your homeschool organization in 2009? HomeschoolCPA< Carol Topp,  recorded her on-line workshop for homeschool leaders.  Just in time for tax season.

Paying Workers in a Homeschool Organization

was recorded on

Friday, January 15, 2010

and is now available for you!

or listen at the Talkshoe site here: HomeschoolCPA’s Workshops

Topics:

• Volunteers. Can you pay a volunteer? How to reward volunteers.
• Independent Contractors. What are they? What IRS forms need to be filed?
• Employees? How are they different from Independent Contractors? What forms does the IRS require?

The workshop runs for one hour.

Look for more upcoming online workshops. Sign up for my newsletter to be informed of the next date and topic.

Carol Topp, CPA

Independent contractors and W-9 form

Carol,Hello!  I wanted to check with you about a sentence that is in our Independent Contractor Agreement. No one has ever given us a W-9 before even though they have signed the agreement. Why are the contractors submitting any tax related information to us? I thought they were to complete all of that completely on their own. Is that part necessary? Can you please advise on this?

Thank you so much!!!
Tanya B

Tanya is referring to a sample independent contractor agreement I include in my Money Management for Homeschool Organizations and Paying Workers in a Homeschool Organization ebooks. Both are available at my bookstore.

The W-9 is the official way to collect an Independent Contractor’s name and SSN or business name and EIN(Employer Identification Number).  This information is needed if your pay them over $600 a year and issue them a 1099MISC.

It is also the unofficial way to determine if you are dealing with ethical people.  Some people do not like giving their information on a W-9 because they were not going to report the income on their tax return.  Having them fill in a W-9 indicates that your organization obeys the law and expects them to obey the law as well.

Carol Topp, CPA

Carol,
Actually the parents with students in the class pay the independent contractors directly.  It does not come from the co-op’s funds.  Do I still need to keep track of how much they get as an annual total from the parents and work complete these forms?  If so, we may need some additional guidance.
Thank you,
Tanya

Homeschooling Other People’s Children. Is It Legal?

Dear Ms. Topp,

I found your website while trying to research information on hiring a private homeschool instructor for a friend of mine.  She’s a single parent who adopted a girl from Russia.  She’s having a little bit of a problem in public school and I thought it might be a good idea to homeschool her for her middle school years at least to focus on her language skills and other abilities.

Can you point me to some information on whether she can even hire a homeschool instructor to work with her daughter?  I know this may sound crazy, but I keep thinking what her daughter needs is a governess.  Or maybe I’ve read too many Bronte and Austen novels.  Any help you could provide would be most appreciated.

Sincerely,

G.A.

Dear G.A.

I think you are absolutely correct in using the term governess to describe your friend’s situation.
I have a blog post titled “Is It a Homeschool Co-op or Mary Poppins?” that addresses a similar question.

I have been asked questions similar to yours several times, so it not an unusual idea. It is quite an old idea as you references (Jane Eyre is a favorite!)

I would direct your friend to do research in three areas:
1. Her state homeschool laws and see if a non-parent is allowed to instruct a child. I imagine it is allowed, she may just have to report the governess’ name and subjects covered on an annual basis (we do here in Ohio, for example)
2. Employer laws in your state.  A local CPA would be helpful here. The governess may be considered a household employee and that has easier tax reporting requirements (like annually, not quarterly filing).  Employer taxes (Social Security and Medicare) will need to be paid.
3. Perhaps consult with an attorney to draw up an employment agreement.  Perhaps a professional tutor or nanny/au pair service in your area may have sample agreements to use as a guide.

I hope that helps!

Carol Topp, CPA

Homeschool Leader, Do You Need Help?

Paying Workers in a Homeschool Group ebook

I’m happy to announce a new ebook to help homeschool leaders

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?

This 20 page ebook covers paying workers as employees or independent contractors.  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.

Read a sample here

Price: $7.00 Available for immediate download as a pdf file

Click Here to Purchase

After you fill in the order page, you will receive an e-mail with instructions and a link to download your ebook.

I really hope you find this ebook helpful.

Carol Topp, CPA

New Ebook: Paying Workers in a Homeschool Organization

My friends, Kristen & Denise, at Homeschool Group Leader are giving away a copy of my newest ebook:

Paying Workers in a Homeschool Organization.

(I don’t even have this up on my website yet, so you are really getting first grabs!)

I get asked a lot about paying teachers, administrators and volunteers by homeschool leaders. I think this 17 page ebook will answer a lot of questions.

To get your free copy, leave a comment on Homeschool group Leaders Facebook page here:  Homeschool Group Leader Facebook page

All you have to do to get your free copy is two simple things by the end of June:
1. JOIN our Facebook group and POST a comment or an answer or ask your own question on it: I Am a Homeschool Group Leader
2. Then, BECOME a fan of our Facebook page, Homeschool Group Leader

Become a fan and you’ll be e-mailed the book within 48 hours.

This offer is only good until the end of June.

Kristen & Denise have big hearts and desire to help homeschool group leaders. They have big plans for offering support, so become a fan and learn what they are offering and connect with other homeschool leaders.

Carol Topp, CPA

Update on teachers as independent contractors

In Is Your Hired Teacher Really an Employee? I mentioned a homeschool group dealing with the IRS over teacher classification as an employee or independent contractor (IC).   They replied to the IRS via a letter stating their case for worker status an an Independent Contractor. They heard back from the IRS and the IRS determined that the teacher was misclassified as an independent contractor and should be reclassified as an employee.  The IRS wants $500 in back taxes (at least there are no penalties!)  The homeschool organization strongly disagrees and contacted a labor law attorney to help draft a letter back to the IRS.

Update:  The IRS issue was settled with no penalties, but then the State of Ohio audited this homeschool group and has fined them  $3,000-$4,000 a year for three years for unemployment taxes.  The State of Ohio sided with the IRS that the workers were employees and the organization should have been paying unemployment taxes on them.  Thankfully the state can only audit back for three years.

The issue brought to light that many (perhaps most) homeschool organizations that hire teachers pay them as independent contractors.  Most homeschool groups are small nonprofits without accounting staff to manage the paperwork of withholding and paying employment taxes, creating W-2s, etc.  It’s easier to deal with an IC than an employee.  But the IRS reminds us the the facts of the situation determine worker status, not the organization’s preference.

Also, most hired homeschool teachers are only teaching about one hour a week and are given a lot of freedom in how to conduct their class.  This was all true for my client, but the IRS still determined the teacher was an employee. She even signed a IC agreement three years in a row, so even a contract was not enough evidence for the IRS.

Here’s what I’m doing:

Please pass on this information to homeschool groups that you know hire paid teachers.  It doesn’t pay to be ignorant.

Carol Topp, CPA

What's a volunteer worth?

Volunteers are worth their weight in gold. Most homeschool organizations are run completely by volunteers who are doing a wonderful service to their community and other homeschooling families. What’s a volunteer worth? Priceless? Independent Sector, a coalition of nonprofits,  calculates the worth of an hour of volunteer time.

The estimate for the value of volunteer hour jumped by 74 cents, from $18.77 in 2006 to $19.51 last year, according to Independent Sector (IS), a Washington, D.C.-based coalition of nonprofits and foundations.

Washington, D.C. had the highest hourly value ($30.10) .  The top states were all found in the Northeast: New York ($26.18), Connecticut ($25.75), Massachusetts ($24.29) and New Jersey ($23.62).

In all, 10 states eclipsed the $20 value and all but seven had values of more than $15.

Source: http://www.independentsector.org/programs/research/volunteer_time.html

Could your homeschool group survive if you paid your volunteers these wages? Probably not…they are indeed quite valuable.

I  am frequently asked if a volunteer can be paid. If you pay a volunteer, she is no longer a volunteer anymore.She  is an employees and your homeschool organization will owe employer taxes such as Social Security, Medicare, Unemployment and Worker’s Comp.

I recommend homeschool groups show appreciation though thank you notes, gift certificates, verbal appreciation and praying for your volunteers.

Carol Topp, CPA

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