Paying co-op leaders

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?

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

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!

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

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