Homeschool co-op has a super volunteer. Can she be paid?

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Hi Carol,

Our co-op is a nonprofit corporation. Almost all of our tutors in the co-op are moms with kids in the program. The moms do not get pay in money for teaching but are offered “credits” against tuition.

1) Are we correct to assume that we are not dealing with either Independent Contractors (IC) or employees in this circumstance?

2) We have one tutor who gets “credits” and payment. Can we regard her as an IC if she submit an invoice?

We do have a few tutors whom we pay and we will need to look more closely into invoices and 1099 MISC.

Thank you so much for your advice. If these questions are covered in your ebook, please let me know.

-MG

 

Dear MG,

Thank you for contacting me. Let’s see if I can answer your questions.

1. Sounds like your tutors are volunteers. You thank them with tuition discounts (or “credits” as you call them). The more a person volunteers, the larger the discount/credit. There is no problem with doing that, except the “credits” are really a form of compensation for her services and are taxable income to the recipient. Your”volunteers” won’t like hearing that news!

Paying a Volunteer

2. Paying a volunteer gets very tricky. She’s no longer a volunteer because she is paid. She’s actually a mix; some volunteer and some paid. That’s what’s confusing. If you can clearly separate her volunteering from her paid tasks, then do that. For example, if she tutors and gets credits (which are taxable compensation) and then in addition designs your website for free, it’s pretty easy to separate those two jobs.

Super volunteers

But some people are what I call “super volunteers.” They volunteer so much beyond their discounts or credits that the organization pays them for their extra volunteering. But volunteers cannot get paid, so she’s either an employee or an IC.I cannot determine her worker status with the information you gave me.

If you want to treat her like an independent contractor, then she cannot receive benefits like tuition credits. The value of these credits need to be reported to the IRS and added to her taxable income.
I discuss this in Money Management in a Homeschool Organization. See Chapter 12.

Cover Money Mgmt HS Org

The Money Management book will be helpful and so will my Paying Workers in a Homeschool Organization book, because it shows the forms needed for employees and Independent contrcators.

 

Carol Topp, CPA

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Paying Workers in a Homeschool Organization Part 2 podcast

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Do you pay workers in your homeschool organization?

Do you know what form to to filing with the IRS?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 2 of a 2 part series.

Listen to the podcast

 

Show Notes:

Applying for EIN. Use IRS Form SS-4. Read this helpful article first Getting an EIN from the IRS.

IRS forms to give to independent contractors (IC).

  • Use IRS Form W-9 to collect the IC’s legal name and EIN.
  • Read IRS Pub 15A Employers Supplemental Tax Guide.
  • Give Form 1099MISC to every IC paid more than $600 in a calendar year. Unfortunately Form 1099MISC cannot be printed on your home printer. You must order it from the ITS or buy a set at an office supply store. I use FileTaxes.com to file and mail Form 1099MISC.

IRS forms to give to employees

  • Collect a W-4 and an I-9 (Immigration) from each employee. Get employment forms at IRS.gov
  • Read IRS Pub 15 Employers Tax Guide
  • Give each employee a W-2 at the end of the year. (I use FileTaxes.com to file and mail the W-2’s to the employees)
  • Form 941 or 944 to pay your employer taxes (Social Security and Medicare). Find employment forms at IRS.gov.  I use FileTaxes.com to prepare and file 941/944 or fill in online print and mail.

What to do if you are paid by homeschool organization an receive a 1099MISC

  • File Schedule C Profit or Loss from Business of the Form 1040. List all your income and expenses from being a independent contractor.
  • Pay federal income tax and  self-employment tax (same as Social Security and Medicare for self-employed people) using Schedule SE (attached to your Form 1040.

If you find these forms confusing, consider a private consultation with Carol Topp, the Homeschool CPA. She can help you prepare and file the correct forms.
Carol mentioned a few helpful resources:

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization (short ebook)

Questions and Answers for Homeschool Leaders (ebook)

Money Management in a Homeschool Organization (newly expanded) in paperback or ebook. The Paying Workers ebook is incorporated as a chapter in this book, so you don’t need to purchase both.

Other helpful books and articles for homeschool leaders can be found at HomeschoolCPA.com

 

Be sure to listen to the first part of this podcast (Episode #17) where Carol explains the difference between employees and independent contractors.

Paying Workers in a Homeschool Organization Part 1 podcast

DollarsSenseShow17

Do you pay workers in your homeschool organization?

Are they employees or independent contractors? Do you know the difference?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 1 of a 2 part series.

Listen to the podcast here.

Carol mentioned a few helpful resources:

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization (short ebook)

Questions and Answers for Homeschool Leaders (ebook)

Money Management in a Homeschool Organization (newly expanded) in paperback or ebook. The Paying Workers ebook is incorporated as a chapter in this book, so you don’t need to purchase both.

 

 

Be sure to listen to the second part of this podcast when Carol shares what forms you need to be filing with the IRS when you pay workers.

Where to find a sample teacher agreement for a homeschool co-op?

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Hi Carol,

Thank you so much for the wealth of information you provide through your writings!
Where might I find an example Independent Contractor Agreement we might use for our homeschool cooperative?

Thanks!

Lisa T in NYC

Lisa,You can try googling “Independent contractor homeschool” and see if any groups have posted their agreements.

In my ebook Paying Workers in a Homeschool Organization I have a sample agreement. http://homeschoolcpa.com/bookstore/paying-workers-ebook/

You could join the Facebook group I am a Homeschool Group Leader and see if anyone will share their agreement. https://www.facebook.com/groups/72534255742/

Carol Topp, CPA

Can a homeschool athletic booster club be a 501c3?

FreeDigitalPhotos.net Credit: Salvatore Vuono

FreeDigitalPhotos.net Credit: Salvatore Vuono

Mrs Topp,

For several years my wife has operated a group here in Lubbock Texas.  The purpose of the group is to raise funds for our homeschool athletic teams to pay for various aspects of their sporting endeavors.

 The group receives a percentage of sales from concession stands operated at Texas Tech University and are paid by Ovations, the current concessions operator for Texas Tech.   Ovations uses non-profit groups to operate all concession stands.

 We have never sought non-profit status and now Ovations is insisting that we do so or they will no longer use us.

We has always paid each individual working in the stand based on how much time they worked, and given out 1099MISC to those making over the minimum $600.  Those working come from homeschool athletic teams though we do not dictate how the money each receives is spent.

 In reading the IRS website I can see that sports organizations are eligible for non-profit status, but is the way we pay those working acceptable?

 Paul H

Lubbock, Texas

 

Paul,

Your organization sounds like a parent booster club in that you raise funds to support athletic teams. Yes, booster clubs and athletic teams can be 501c3 tax exempt organizations.

The issue of paying parents working a concession stand has come up with the IRS in the past.
Here is a blog post I have written on the topic.
http://homeschoolcpa.com/the-irss-word-on-fundraising-dos-and-donts/
I think the IRS would approve of the way you are paying the parents. Giving them a 1099MISC is the correct way to report their earnings.

You might also find this website ParentBooster.org helpful.

ParentBooster.org offers tax exempt status to athletic booster clubs that support the activities of a school under their group tax exempt status. I asked the founder, Sandy Englund, if homeschool booster clubs would be eligible for 501c3 tax exempt status under ParentBooster.org, but she said no. Maybe you should ask and see if you get a different answer. It would be a very easy way to obtain your 501c3 tax exempt status.

 

 

 

 

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

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 four 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 1099-MISC 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.

My new book Paying Workers in a Homeschool Organization can help homeschool leaders understand the correct way to pay workers and volunteers in your homeschool group !

Carol Topp, CPA


payingworkerscoveroutlined

Paying Workers in a Homeschool Organization-2nd edition

$9.95 paperback
130 pages
Copyright 2017
ISBN 978-0-9909579-3-5

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

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.

But these are only a few of the factors to address in making a worker determination.

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 an RS brochure regarding employee or independent contractor status (IRS Pub 1779).

 

My new book Paying Workers in a Homeschool Organization explains in detail how to determine of your worker is an employee or an Independent Contractor.

You may want to have a private consultation to discuss your unique situation. I offer a Worker Classification Determination consultation to put your mind at ease.

Carol Topp, CPA


payingworkerscoveroutlined

Paying Workers in a Homeschool Organization-2nd edition

$9.95 paperback
130 pages
Copyright 2017
ISBN 978-0-9909579-3-5

BuyPaperbackButton

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Paying co-op leaders

meeting

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:
PayingWorkersCoverRead 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?

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 own and run the co-op  as your businessor 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 organize without a profit motive and assemble a board to lead the group? 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 teamThe 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 contractors and be giving them a W-2 or Form 1099MISC showing their wages.
You can learn a lot by listening to a podcast I recorded on Paying Workers.
HS Co-ops Cover_400My 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

IRS auditors crackdown on independent contractors

IRS

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? Probably, if your organization has been paying people as independent contractors when they are really employees. How can you tell the difference?

I can help.

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 employees 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.

To request a consultation, please contact me. I’m happy to help and relieve any anxiety you have about this confusing topic.

Carol Topp, CPA

 

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