Still time to sign up for Tax Preparation for Homeschool Business Owners tonight!

TONIGHT at 8 pm ET

 

There is still time to register for  my webinar on

 Tax Preparation for Homeschool Business Owners

Tonight! Monday January 21, 2019 at 8 pm ET (7 pm Ct, 6 pm MT, 5 pm PT)

https://zoom.us/webinar/register/WN_wRQ0ClzCSb6APkajE967ZA

Here’s what the webinar will cover:

  • Highlights of tax changes for 2018
  • IRS tax forms for a sole proprietorship: Schedule C and SE
  • Self-employment tax
  • How to pay yourself
  • Tax deductions common to homeschool business owners
  • New tax deduction for 2018! Look out for this one. It’s terrific!
  • The new redesigned IRS Form 1040
  • A sample tax return. Yes, I will walk you through a sample tax return, so you can see how everything looks. 🙂
  • Common mistakes to avoid

 

This webinar is for business owners selling services to the homeschool marketplace which can include:

  • Paid teachers at a homeschool co-op
  • Tutors getting paid as Independent Contractors
  • Directors/owners of homeschool programs such as CC directors running a community
  • Music teachers, tutors, coaches, etc. running their own businesses

This webinar will not cover:

  • Businesses selling products like homeschool curriculum or ebooks (I won’t have time to go into the complexities of selling goods, but you’re still welcome to join us and pick up a few tax tips!)
  • Nonprofit organizations (but if you work as an Independent Contractor for a nonprofit, this webinar is for you)
  • Businesses organized as partnerships or corporations. In one hour, I won’t have time to go into the more complex tax treatments for partnerships or corporations.

The webinar will be FREE for all who register and attend live tonight at 8 pm ET. It will be free for about 24 hours after the webinar to all who register (until Tuesday January 22 at around 10 pm ET). After that, a small fee of $10 will be charged for viewing the webinar video.

Please register even if you cannot attend live tonight Monday January 21, 2019 at 8 pm ET/7 pm CT/6 pm MT/5 pm PT so you get:

  • Free access to the webinar video for 24 hours (until Tuesday January 22 at about 10 pm ET)
  • Download of the webinar slides (not quite ready yet, but will be soon. If you already registered the link to the slide handout will be in your reminder emails.)
  • Notification of upcoming webinars for homeschool business owners and nonprofit leaders

 

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

The federal government might be shut down, but you still have to file 1099-MISC by January 31

The US government is partially shut down, but taxpayers still must file their 1099-MISC forms by January 31, 2019.

Your homeschool business, tutoring program, nonprofit organization, co-op or community must give a 1099-MISC to anyone you paid more than $600 in 2018.

 

Greatland cpa academy webinar yearli logo

I recommend you use an online filing system like Yearli.com Core program by Greatland (my affiliate link). I’ve used them for years.

Yearli by Greatland is the best way for businesses to file 1099 and W-2 forms.

I used to buy forms at an office supply store, upload the software, type in the data, run the forms through my printer, and mail them all off! Even just a few 1099-MISC could take a long time! And heaven forbid you misfeed the red ink IRS forms into your printer (I did!). You could not make a mistake or back to the office supply store to but another set! Ugh!

Yearli by Greatland makes it so easy and they charge only $4.99 per 1099-MISC. They send a copy to the IRS and mail a copy to the recipient. Simple!

You’ll receive 15% off your filings because I referred you.
You will need the following information:

  • Your business or organization’s legal name, address and EIN number
  • The recipient’s name, address, SSN number and total amount paid in 2018.

Don’t forget you have to have the 1099-MISCs completed by January 31, 2019!

 

Carol Topp, CPA

HomeschoolCPA.com

 

Webinar: Tax Preparation for Homeschool Business Owners

 

Taxes! Oh my! 2018 tax returns will be a doozy with massive tax law changes and the redesigned Form 1040.

But tax preparation for homeschool business owners is even more complex than regular taxpayers.

Fortunately, HomeschoolCPA is here to help. I’m offering a free, live webinar.

 Taxes for Homeschool Business Owners

Monday January 21, 2019 at 8 pm ET (7 pm Ct, 6 pm MT, 5 pm PT)

https://zoom.us/webinar/register/WN_wRQ0ClzCSb6APkajE967ZA

Here’s what the webinar will cover:

  • Highlights of tax changes for 2018
  • IRS tax forms for a sole proprietorship: Schedule C and SE
  • Self-employment tax
  • How to pay yourself
  • Tax deductions common to homeschool business owners
  • New tax deduction for 2018! Look out for this one. It’s terrific!
  • The new redesigned IRS Form 1040
  • A sample tax return. Yes, I will walk you through a sample tax return, so you can see how everything looks. 🙂
  • Common mistakes to avoid

 

This webinar is for:

  • Paid teachers at a homeschool co-op
  • Tutors getting paid as Independent Contractors
  • Directors/owners of homeschool programs such as CC directors running a community
  • Music teachers, tutors, coaches, etc. running their own businesses
  • Business owners selling services to the homeschool marketplace

This webinar will not cover:

  • Businesses selling products like homeschool curriculum or ebooks (I won’t have time to go into the complexities of selling goods, but you’re still welcome to join us and pick up a few tax tips!)
  • Nonprofit organizations (but if you work as an Independent Contractor for a nonprofit, this webinar is for you)
  • Businesses organized as partnerships or corporations. In one hour, I won’t have time to go into the more complex tax treatments for partnerships or corporations.

The webinar will be FREE for all who register and attend live. It will be free for about 24 hours after the webinar to all who register. After that, a small fee of $10 will be charged for viewing the webinar video.

Please register even if you cannot attend live on Monday January 21, 2019 at 8 pm ET/7 pm CT/6 pm MT/5 pm PT so you get:

  • Free access to the webinar video for 24 hours (until Tuesday January 22 at about 10 pm ET)
  • Download of the webinar slides (not quite ready yet, but will be soon. If you already registered the link to the slide handout will be in your reminder emails.)
  • Notification of upcoming webinars for homeschool business owners and nonprofit leaders

 

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 CC Director offered reduced tuition to her tutors?

 

Can a Classical Conversations director gift an Independent Contractor or employee with free or reduced tuition?

Suzy

 

Suzy,
A Classical Conversations (CC) Director can give educational benefits (i.e., discounts on tuition) to Independent Contractors (IC) or employees, but (and this is a big, “but”) the value of these educational benefits is taxable income and must be reported on their W-2 or 1099-MISC.

So a CC director can offer a tuition discount to an IC or employee, but must add the value of that discount to the tax reports she gives to her tutors (1099-MISC or W-2).

And the worker must report her paid wages and the value of this discount/gift on her tax return as taxable income. You should warn her about that in writing and face-to-face, so they aren’t surprised at tax time!

We think that taxable income is only what comes in a paycheck, but the IRS defines taxable compensation to include “educational benefits.”

compensation includes salary or wages, deferred compensation, retirement benefits…, fringe benefits (personal vehicle, meals, lodging, personal and family educational benefits, low interest loans, payment of personal travel, entertainment, or other expenses, athletic or country club membership, and personal use of your property), and bonuses.[i]  (my emphasis added)

[i] Instructions for Form 1023 https://www.irs.gov/instructions/i1023/ch02.html#d0e1909

So, yes, a CC Director can offer free or reduced fees to an Independent Contractor or employee, but it is not a gift; it is taxable income and must be included in their wage and income reporting.

A CC Director should also check her license agreement with Classical Conversations to see if reduced fees are allowed.

If you have additional tax questions about being a CC Director, I wrote an ebook that can help!
Taxes for Licensed CC Directors is available from Classical Conversation. Find it here
Carol Topp, CPA
HomeschoolCPA.com

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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Aren’t Classical Conversations tutors just like online tutors?

I’m a Classical Conversations Director and I have a local CPA. I have a question about independent contractor status for tutors. The articles I read here seem to suggest we should treat tutors as employees. Yet, for several years I worked as a tutor for national online tutoring company as an independent contractor. I was given training, direct oversight, evaluations, worked for 5-10 hours a week, yet I was an independent contractor.

What is the difference with CC tutors in the eyes of the IRS? Just trying to understand!

Thanks, Allison

 

Allison,
Thank you for contacting me.

You seem to assume that your worker classification as an Independent Contractor as  a tutor for a national online tutoring company was the correct classification. I’m not convinced it was.

You only told me four bits of information about your relationship with the online tutoring company (I was given training, direct oversight, evaluations, worked for 5-10 hours a week), yet three of those practices (training, evaluations, and oversight) would confirm your status should have been as an employee, not an Independent Contractor.

When I make a worker determination, I do not base my conclusions on what other companies have done or are doing. I base my conclusions on the IRS guidelines, tax court cases, IRS rulings, and the facts and circumstances of each case.

You asked, “What is the difference with CC tutors in the eyes of the IRS?” There may not be many differences in the online tutoring and tutoring for CC,  but I don’t assume that you were correctly treated as an IC when you did the online tutoring.

Classical Conversations offers an ebook I wrote, Taxes for Licensed Classical Conversations Directors, where I explain the options to CC Directors in how to pay tutors.  You can treat your tutors as Independent Contractors and in the ebook I explain the risks and consequences involved.

You might show portions of the ebook to your local CPA and get his/her opinion. If he or she determines your tutors are Independent Contractors, then you should request that your CPA put his/her conclusion in writing and on firm letterhead. A letter like that could possibly help you avoid IRS penalties if you are ever investigated by the IRS. But let’s hope you never need it!

If you have more questions, I would be happy to arrange a phone consultation with you. We can discuss a lot of topics in an hour, but in particular your questions about paying your tutors.

Carol Topp, CPA

 

Tax Form 1099-MISC to Independent Contractors

Did your homeschool organization pay an Independent Contractor more than $600 in 2017? Then you need to give them a 1099-MISC form.

Accountant Carol Topp, the Homeschool CPA, explains how to fill out the form, how to get the form, and tips for filing it correctly.

In the podcast Carol mentioned using a 1099-MISC filing service like Yearli.com. Email Carol@HomeschoolCPA.com for a discount code worth  15% of their prices.

 

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 alos 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 to request more information!

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

Can a homeschool co-op have independent contractors and follow the IRS guidelines?

Hi Carol!

Are you aware of any homeschool co-ops/tutorials that have hired teachers as independent contractors and do it in a way that follows the IRS guidelines?
Thanks!
Lauren

Lauren,

I am aware of a lot of homeschool co-op and tutorials that pay teachers as Independent Contractors. Are they following the IRS rules?

Maybe. It depends. Read on…

After a lot of research into IRS rulings and US Tax Court cases concerning the classification of teachers (usually college professors), I learned that one of the factors that weighed heavily in the decision (employee or Independent Contractor) was:

Does the worker provide the primary activity of the organization.

This was really important in the IRS and tax court decisions.

Case 1: employees: I spoke to one homeschool leader who ran a homeschool tutorial program with 12 teachers, all paid instructors. There were no volunteer teachers. Those teachers are providing the key activity of the business. Without them, there would be no homeschool tutorial program. Those teachers are employees.

Case 2: Independent Contractor: On the other hand, I spoke to a homeschool co-op leader who had 15 parents volunteering as teachers and one paid outside person to teach one class. This person was very independent (she had an established tutoring business, picked her own curriculum, received no training or benefits from the co-op, brought in her own supplies, and many other factors).  She was treated as an Independent Contractor. Her services were not the key activity of the co-op; what the volunteer parents provided was the key activity of the co-op. The co-op could continue to exist if that Independent Contractor teacher was unavailable.
This co-op did everything they could to avoid controlling their Independent Contractor teacher. They also has a written agreement and she invoiced the co-op for her services.

But just to be sure, they requested I write a letter clearly stating the facts of their situation and my determination that the outside teacher was correctly classified as an Independent Contractor. It’s called a comfort letter.

My letter, as the opinion of a tax professional licensed to practice before the IRS, can serve as a reasonable basis if the IRS ever questions the homeschool co-op. This reasonable basis will help the homeschool co-op avoid any penalties and back taxes from the IRS.

See how the facts and circumstances of each case can be different? There is not bright line test in worker classification. The determination if your homeschool program teacher is an employee or Independent Contractor depends on the facts and circumstances of each case.

If you would like help determining your teacher’s status or have me write a “comfort” letter, contact me. We’ll set up a phone call where I ask you a bunch of questions. The phone call will be followed up with an email containing a fact-based determination and information to help you take the next steps.

My book Paying Workers in a Homeschool Organization is a great place to start to understand how to properly classify your workers.

I released a podcast on creative ways that homeschool co-ops hire teachers without paying them as employees. It runs about 9 minutes long.

Creative Ways to Run Your Co-op Without Employees

I hope that helps,

Carol Topp, CPA
HomeschoolCPA.com
Helping homeschool leaders