HomeschoolCPA.com » Hiring workers

Paying teachers in a homeschool co-op is a sticky situation!

Carol Topp — Sat, 03 Sep 2011 10:10:33 +0000

Amy asks a common question: paying teachers at a homeschool co-op

For the past several years, our group has spent more (thousands more) than we have charged our members. We’re not technically “in the red” because of more prosperous years in the past. The reason we are spending so much money is that over 90% of our income goes to paying our parent-teachers ($15-$20/hour)! The rest of the money goes toward classroom supplies. I am sure that most parents are unaware of how the finances of this group are managed.

Have you heard of groups paying their teacher/parents? What do I need to understand about the various homeschool support and cooperative group structures that I don’t currently comprehend? Help!
-Amy

Amy,

Your situation sounds very familiar to me. I too was treasurer of my 40 family co-op and found that 75% of our budget was going to pay 4 paid teachers. The other 20 teachers were volunteer parents, myself included. Not all the families were using a paid teacher, but all were chipping in to pay for them. We also were finding that people were offering to teach because they thought they could get paid. We were losing our cooperative spirit. I knew something needed to change.

About the same time I was helping another homeschool group with some independent contractor/employee issues with the IRS. I wrote about it on my blog. You can read about it here:

Is your homeschool group’s hired teacher really an employee?

Update on Independent Contractors.

We decided to follow IRS guidelines and have the parents pay the teachers directly, like you would pay a piano teacher. The co-op was no longer paying the teachers.

I did some number crunching and found that we could lower our co-op fee from $150/family/semester to $75/family/semester. In addition we offered a $50 discount for teaching a class.

What happened was amazing! Wonderful, talented homeschooling mothers volunteered to teach a class! We had more volunteers than we could accommodate. REALLY! If a mother volunteers to teach a class she only pays $25/semester for her family to attend 3 hours of classes at our co-op. If her child attends one of our paid classes (there are only 3, guitar, art and Spanish) then she pays the teacher directly. For example, I pay $65/semester for my daughter to take an art class. I think the teacher is worth it.

This got us out of the sticky employee/IC situation with the IRS. I’m writing fewer checks. It made my job as treasurer a lot easier and no 1099MISC forms at the end of the year. No one complained. The spirit of cooperation has returned. YEAH! I’ll also add that we let the volunteers decide what they wish to teach. If we cannot find a Spanish volunteer, no Spanish class is offered. If enough parents want Spanish we may see if a teacher can come to the co-op. We give her a room and she collects her fees from the parents directly.

I wrote an ebook Paying Workers in a Homeschool Organization. For only $3.00, I think you’ll find it very helpful. Order here

The issue of paying teachers as employees is too important to ignore.

Your group may have to consider some big changes.

Good Luck!!

Carol Topp, CPA

Is your homeschool co-op’s hired teacher really an employee?

Carol Topp — Tue, 30 Aug 2011 10:00:13 +0000

A homeschool nonprofit I work with called me quite frantic. They had received a letter form the IRS. It seems that a former teacher of one of their classes was asking for an examination of her status as an independent contractor (using IRS Form SS-8). She thought that she should be classified as an employee of this homeschool nonprofit. If the IRS agrees with this worker, the homeschool organization may have to pay back taxes (Social Security and Medicare) and perhaps penalties.

Fortunately this homeschool group did many things right:

1. They had all their paid teachers sign a Independent Contractor Agreement.
2. They did not control the content of the class, nor dictate to the teacher what curriculum she must use.
3. They offered no benefits to teachers.
4. They did not train their teachers.

How about your homeschool group? Would you pass an IRS examination?

Do your hired teachers sign an Independent Contractor agreement?

Do you avoid controlling their work as you might an employee?

Here’s a helpful IRS brochure regarding employee or independent contractor status (IRS Pub 1779).

I’ve written about paying teachers in a homeschool co-op setting:

Paying teachers in a homeschool co-op

W-2 and tax filings for teachers

Finally, my ebook Paying Workers in a Homeschool Organization is also helpful with examples of the forms your need to file.

Carol Topp, CPA

Paying co-op leaders

Carol Topp — Tue, 11 Jan 2011 21:28:19 +0000

Hello,
I am the leader of a support group with around 65 families. Our group has a board of elders and by-laws. We also have a co-op of about half the members of the larger group. The co-op requires members to be a member of the larger group. The co-op has separate leadership and it’s own checking account. The by-laws don’t address the co-op specifically.

The co-op pays the leadership and teachers from their account. Tuition and fees are charged for participating families. Teachers are written checks from the co-ops account monthly. “Teacher Gift” is always written in the memo in the checks. For the most part, curriculum for the classes are decided upon by the leadership of the co-op. Those in the leadership of the co-op serve no other volunteer function in the main group (their leadership on the co-op has been counted as their volunteer service for all the 7 years the co-op has existed ). Another member of the group has complained that their paid leadership service is not volunteer service and should not be counted toward the main group. I do agree with this. But it seems that we need to address this and some other issues that aren’t quite right.

Should our groups separate? The larger group has not reviewed the co-op’s financial records. The co-op only gave out 1099′s last year for the first time. I know that whatever is done, there will be hurt feelings and I am at a loss to know where and how to tackle these issues. Where and what should I start with?

Thanks in advance.

Tina

Tina,

Here’s my advice:
Read my ebook Paying Workers in a Homeschool Organizations. Available as a pdf for immediate download for $7.00 at
http://homeschoolcpa.com/bookstore/paying-workers-ebook/

Good for your group for finally giving 1099MISC to the teachers! But you should stop writing “Teacher Gift” in the memo. These are not gifts. They are payments for services.

In my experience, it is untypical for homeschool co-op leaders to be paid. That is because most co-ops cannot afford to pay leaders. Instead, many leaders receive discounted tuition (or free classes) in appreciation for their volunteer efforts.

Since you are paying these leaders, they are employees, not independent contractors as your teachers apparently are (although this statement concerns me: “curriculum for the classes are decided upon by the leadership of the co-op.” It sounds as if they are employees and not independent contractors). Employees require quite a bit more paperwork and may involve paying unemployment tax and workers compensation taxes. I discuss the difference between independent contractors and employees in the Paying Workers ebook.

You asked: “Should our groups separate? The larger group has not reviewed the co-op’s financial records.” Obviously the larger support group has neglected some of their responsibilities. See my blog post on leader responsibilities here:
http://homeschoolcpa.com/what-are-the-legal-responsibilities-of-homeschool-leaders/ Perhaps it is time to weigh the pros and cons of being separate. A lot goes into that decision.

You also said: “Another member of the group has complained that their paid leadership service is not volunteer service and should not be counted toward the main group. I do agree with this. But it seems that we need to address this and some other issues that aren’t quite right.”
You are correct that you cannot pay a volunteer, so perhaps the volunteer service is not fulfilled because they are paid.

If you wish to discuss your group’s issues and concerns, I do offer private phone consultation with homeschool leaders. It’s one of my most popular services. Read more about it here: http://homeschoolcpa.com/services/consultation/

I hope that helps.

Carol Topp, CPA
HomeschoolCPA.com Helping homeschool leaders
————

Hi,

I wanted to thank you so much for writing back and give a little update. The officers met and decided to work at correcting any errors we may be making. We have a meeting scheduled with the co-op directors in the next couple of weeks. I think it is so important to set a good example in everything you do.

I do want to add that I was incorrect in that the co-op leaders receive tuition waivers instead of being paid. Once we get all the information on the finances, then we can make the necessary decisions about our groups. I am praying for a smooth road.

Your website is very helpful and I have shared it with all the officers of our group. We are so very appreciative.

Tina

What business structure and tax forms are needed for a new homeschool co-op?

Carol Topp — Sun, 10 Oct 2010 18:07:19 +0000

Hi,

I am a 15 year homeschooling veteran who started a co-op last fall. I am now being asked by my church for ‘official’ documents to include: business status, liability insurance, tax information. I have a checking account for our co-op.

We offer 30 classes, one day a week, for 5 hours. Six of the 30 classes are paid classes. The student gives the co-op ~$2.00 each class. I write a check to the teacher for $20.00 each time they teach. The teacher always makes $20.00. The student pays a varying rate dependant upon how many students are in the class.

What business status do I need?

What tax forms am I required to file?

What type of liability insurance do I need if the parents are always on site and never drop off students?

Thank you greatly for the information.

Sincerely,

Lauren T

Lauren,
Good for you for starting a homeschool co-op. I’m sure it is a blessing for many families.

Your business status could be a for-profit or a nonprofit. It depends on whether you run the co-op by yourself or whether you have a board to make decisions. It also depends on how you opened up the checking account (although that can be changed). Did you use your personal name and SSN? Then you would be a for profit sole proprietorship. Or did you get an EIN from the IRS and call the co-op a nonprofit? Then you are a nonprofit.

These articles might be helpful:
Getting an EIN from the IRS
Checklist for new homeschool organizations.pdf
Choosing a leadership team

The tax forms depend on your business structure. Sole proprietors report business income on Schedule C of their 1040. Most nonprofits apply for 501c3 tax exempt status to avoid paying taxes on their surplus.

There can still be a need for insurance, even if parents stay on site. Accidents can happen, damage to property can happen. You might benefit from reading my article on Insurance for homeschool groups.

Since you are paying teachers, you should read my ebook Paying Workers in a Homeschool Organization. You need to determine their worker status as either employees or independent contarctors and be giving them a W-2 or Form 1099MISC showing their wages.

You can learn a lot by listening to a workshop I recorded on Paying Workers.

My book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out covers a lot of your questions. It is available in print or electronic format. Read more here.

I hope that helps!

Carol Topp, CPA

A new twist on paying homeschool co-op teachers

Carol Topp — Fri, 02 Jul 2010 08:50:09 +0000

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

Carol Topp — Wed, 31 Mar 2010 13:14:58 +0000

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

Carol Topp — Wed, 10 Feb 2010 14:09:56 +0000

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 Topp — Thu, 14 Jan 2010 01:45:49 +0000

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

Tanya,

No 1099MISC is needed since your co-op is not paying the teacher, but the parents are paying him or her directly. You do not need to collect the Form W-9 since the independent contractors are not paid by your co-op.

Carol Topp, CPA

Homeschooling Other People’s Children. Is It Legal?

Carol Topp — Mon, 26 Oct 2009 01:20:58 +0000

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

No related posts.

Homeschool Leader, Do You Need Help?

Carol Topp — Sun, 11 Oct 2009 18:26:49 +0000

I know that being a homeschool leader is not an easy job. You have taken on extra responsibilities in addition to homeschooling your own children. But help is on the way!

I am so pleased to announce several ebooks and audios for homeschool leaders are now available

Money Management for Homeschool Organizations

A 39 page ebook covering money management for small, medium and large sized groups. Sample forms and examples of financial statements in clear English are provided. Also covered are topics such as using Quickbooks, collecting fees, creating a budget, insurance, and hiring paid teachers. All written specifically for homeschool groups.
Price: $10.00 (immediate download as a pdf file)

Read more and order here

Tax Exempt 501c3 Status for Homeschool Organizations

A 51 page ebook explaining the pros and cons of tax exempt 501c3 status. Is it needed? Is it worth it? Also covered are non profit incorporation, the application process, and how to maintain tax exempt status. Written specifically for homeschool groups.
Price: $10.00 (immediate download as a pdf file)

Read more and order here

Questions and Answers for Homeschool Leaders

A 62 page ebook containing some of the most frequently asked questions from homeschool leaders on the IRS, nonprofit and tax exempt status, boards, conflict, money, fund raising, volunteers, paying workers and insurance.
Price $8.00 (immediate download as a pdf file)

Read more and order here

Paying Workers in a Homeschool Organization

A 20 page ebook that covers paying workers as employees or independent contractors. Includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws. Written specifically for homeschool organizations.

Price: $7.00 (immediate download as a pdf file)

Read more and order here

Are You Ready? Tax Exempt 501c3 Status for Homeschool Organizations

audio download

An hour-long audio that explains the advantages of 501c3 tax exempt status for your homeschool group. What’s involved, what will it cost and is it worth it? All specifically for homeschool groups.

Price: $7.00 includes a file of the presentation slides

Read more and order here

How to Manage a Homeschool Organization: Boards, Budgets and Bylaws audio download

An hour-long audio that explains the importance of boards, budgets and bylaws in a homeschool organization. Get your group set up correctly and running smoothly. All specifically for homeschool groups.

Price: $7.00 includes a file of the presentation slides

Read more and order here

I hope you find these ebooks and audios helpful as you run your homeschool organizations.

Carol Topp, CPA

HomeschoolCPA.com