Are Classical Conversations tutors employees or independent contractors?

Hi Carol,
I am a part of a Classical Conversations community with a Foundations/Essentials director. The Foundations/Essentials directors hire tutors to run the classrooms on community day.

I am concerned that the  tutors are being treated as employees even though they are paid as independent contractors. Can a Foundations director hire tutors as independent contractors and still be able to specify what time they start, what material to cover and for how long they are to cover it, require training in the summer and training every 6 weeks of class etc?

Would a contract help? It seems like the contract could call the tutor an independent contractor but the Director could still treat them like employees.

This is hugely concerning and our campus wants to operate in a legal way. We are considering hiring a lawyer to help us understand all this. Is the lawyer the way to go? Or would you be able to advise on how to handle this?

We want to be legal and try to sort out truth in this whole legal situation.

Thank you for your time,

Katherine

 

Katherine,

Thank you for contacting me. I have been talking to several Classical Conversation (CC) Directors and tutors about worker classification. It’s a confusing and complex topic!

Factors: control and key activity

The question of whether CC tutors are independent contractors (IC) or employees is not cut and dried, nor the same for every CC community. There are many factors to consider including some you mentioned such as training, specific time and place to work, the curriculum to use, etc.

Two factors to consider are: the amount of control and if the tutors are providing a key activity of the business. (By the way, these factors of control and providing a key activity apply to all types of homeschool groups, not just Classical Conversations.) Some homeschool organizations may control their tutors so much that they treat them like employees, while others may allow more freedom and could be properly classified as ICs. Some homeschool organizations may depend heavily on the tutors’ services as the key activity of the business, while other homeschool groups may not use tutors as the key activity because they rely on volunteer parents to teach their classes.

Would a contract help?

You asked, “Would a contract help? It seems like the contract could call the tutor an independent contractor but the Director could still treat them like employees.”

You’ve hit the nail on the heard. Having a contract is not assurance that a tutor is an independent contractor; how they are treated carries more weight in determining proper worker classification.

Worker Classification Determination

You asked, “Is the lawyer the way to go?  Or would you be able to advise on how to handle this?

I can make a fact-based worker classification determination. In this determination, I substantiate my opinion based on all the facts, not just the few you mentioned, and court cases involving worker classification.


Additionally, I also just updated  my book Paying Workers in a Homeschool Organization. It explains both the current criteria the IRS uses and the criteria they have used in the past to determine independent contractor or employee status.

 

 

 

 

You could, of course, convert all your tutors to employees, and sleep better at night! I can explain the steps you’ll need to take.  It will be more paperwork and more expense, but you won’t worry about an IRS investigation on worker status.

Carol Topp, CPA

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Top 10 blog posts of 2016

 

Here is a round up of the top 10 most important blog posts from HomeschoolCPA in 2016.

 

Many of them have to do with paying workers in a homeschool organization, probably because I was asked a lot of questions about paying volunteers, giving discounts in stead of paying teachers and the difference between employees and independent contractors.

I also spent a lot of time in 2016 researching and writing Paying Workers in a Homeschool Organization and my blog posts reflect what I was learning.

Compensation to homeschool board members is taxable income

Paying Workers in a Homeschool Organization updated book is ready!

Are homeschool co-op tuition discounts taxable income? Probably!

Can you discount a homeschool co-op class in lieu of paying the teacher?

How you pay your homeschool teachers could affect the property tax exemption for your host church

Can a homeschool group just get together without having to report to the IRS?

Adding religious purpose to bylaws and Articles

Use Quickbooks online for free

Are discounts to homeschool board members taxable compensation?

How the IRS defines a school

I wonder what 2017 will bring in the world of homeschool organizations!

Sign up for my email list to be kept up to date on the questions homeschool leaders are asking.

P.S. Subscribers to my email list get freebies, discounts and special reports I share only with them.

Carol Topp, CPA
HomeschoolCPA.com

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Avoid controlling your independent contractor

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This is an excerpt from my update book, Paying Workers in a Homeschool Organization

Avoid Controlling Your Independent Contractor

If your homeschool group would like to exert some control over teachers such as choosing curriculum or class content, requiring teachers to attend training sessions, or evaluating their performance, then you should pay them as employees.

One homeschool co-op was very particular about what method of teaching and content was taught to their students. They picked the curriculum and required training in their methods and their view of instruction. Then they evaluated the teachers on their teaching style, control of the classroom, and engagement with the students. They may be too controlling for their teachers to be accurately classified as independent contractors. They could increase the likelihood of properly treating the teachers as independent contractors by hiring teachers who are already trained in their methods and views of instruction, not require training (i.e., make it optional), and change their evaluation to focus on the completion of the tasks listed in their agreement and not focus on the teacher’s style of teaching. Or they could hire the teacher as an employee.

How Much Control is Too Much? The Plumber Test

How much you can control an independent contractor is a very difficult question to answer, because every situation is unique. Consider the model of a plumber when thinking about control and independent contractors. A plumber is an independent contractor who is hired for a specific, temporary job: to fix your plumbing. You usually have an informal, verbal agreement and may get an estimate of the cost before he begins work. He comes to your house at an agreed-upon time and brings his own tools. You may show him the problem and be in the room while he works, but you do not tell him how to do his job. You assume he knows what tools to use. He may return for additional work and will invoice you.

Now compare the plumber model to your relationship with your homeschool program’s independent contractors. Does it look like the plumber model? Then you are treating your independent contractors properly. If instead you exert more control over your workers than you do a plumber, then consider reclassifying them as employees.

If you need more information about your homeschool organization teachers, order Paying Workers in a Homeschool Organization today and consider a personal Worker  Classification Consultation with me for your peace of mind.

Carol Topp, CPA


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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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Compensation to homeschool board members is taxable income

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This is an excerpt from my new book, Paying Workers in a Homeschool Organization-2nd edition.

Compensation to board members is taxable income

I was recently reviewing the bylaws for a homeschool organization that stated,

Members of the Board of Directors may receive reasonable compensation for their services and may be reimbursed for actual expenses incurred in the maintenance of their duties.

A homeschool organization can compensate your board for their service, but compensation to board members is taxable income. If the board member is an officer (chair, vice chair, secretary, or treasurer) they must be paid as employees. Other board members who are not officers can be paid as independent contractors and given a Form 1099-MISC.

Did you catch that? If officers are compensated, the IRS laws* say they must be paid as employees. That means creating paychecks, paying payroll taxes (Social Security and Medicare), preparing W-2s and quarterly filings with the IRS and your state, and may mean unemployment and workers compensation taxes too!

Does your homeschool group really want to deal with payroll? It can become an excessive burden on a treasurer or expensive if your organization hires a bookkeeper or payroll service. If you do choose to compensate your board members, I highly recommend using a payroll service.

*“Exempt Organizations: Compensation of Officers” https://www.irs.gov/charities-non-profits/exempt-organizations-compensation-of-officers


I spent at lot of time doing research on this book so that homeschool leaders will know if they are paying their volunteers, board members, and workers legally and correctly.

I hope the book is helpful and lets you sleep at night not worrying about an IRS audit of your worker classification.

Carol Topp, CPA

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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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Can a homeschool group pay a volunteer?

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This is an excerpt from my update book, Paying Workers in a Homeschool Organization

“Can we pay our homeschool co-op director? She works so hard.”

Yes, your homeschool organization can pay someone who works for the organization, but the pay must be reported to the Internal Revenue Service (IRS). The reporting responsibility will be on both the homeschool organization and the worker. Additionally, the organization will have to determine of the worker is an employee or an independent contractor. Other chapters in this book explain the required reporting and worker classification.

Instead of paying a worker, your homeschool organization can show appreciation to a volunteer in a variety of ways, but they may have tax consequences such as:

  • Reduced fees or tuition. Reduced tuition for classes or for a homeschool co-op fee is a nontaxable fringe benefit if it is insignificant (more on that in the book). If the tuition reduction is significant the value of the tuition is taxable income to the volunteer.
  • Gift cards, but they could be taxable income to the recipient if the cards are a replacement for payment for services and not a true gift.
  • Non-cash gifts such as flowers, books, a coffee mug or chocolate are excellent ways to express appreciation and are tax-free to the volunteer.

I’ll discuss each of these types of compensation (reduced fees, gift cards and non-cash gifts) to a volunteer in detail … (you’ll need to buy the book to read the details!)

Carol Topp, CPA


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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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Co-op collects money to send leader to a homeschool convention

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Hi Carol,
My homeschool group’s Board of Directors recently took up a collection from our members as a way of presenting me with an end-of-year gift of appreciation.  This was a complete surprise to me, especially when they presented me with a check totaling over $700!

The Board collected donations from individual members and then wrote me a check on the group account.  I’m unsure of how to deal with this tax-wise. The gift was given with the intent of paying my expenses for our state’s homeschool convention, including the leadership conference. If I returned the check and used the group’s debit card to pay my hotel expenses, would this alleviate the taxes?

Thank you for taking the time to answer.  I want to make this as easy as possible for group record keeping, and I’m not sure if this is the correct way to go about it.

Blessings,
Barbie T, Florida

Barbie,

I’m glad my website and books have been helpful.  You sound as if you have a great group and I’m sure they appreciate you!

Gift or taxable compensation?

It is sometimes difficult to tell if cash is a gift or a payment for services. The difficulty in determining if payment to a worker is a gift or compensation is that you need to determine the intent of the donor. The IRS has a very difficult time determining intent or expectations. We, on the other hand, can usually determine if a payment is a gift because we know the donor and their expectations.

It sounds as if the co-op was collecting money to defray the expense of sending you to a homeschool convention. It is taxable income to you with expectation that you will “earn” it by going to the convention (and learning a lot!).

If you use the payment on co-op related expenses (like the convention), then you could claim those expenses on your tax return. At the end of the year you  should report the $700 as income on your tax return and and then report expenses like the convention fee, mileage and hotel costs as deductions. You may break even or show a small profit.

A better way

In retrospect, it would have been better if the board had collected the monies and then gave you a nice note saying that you won an all expenses paid trip to the convention and used the co-op’s debit card to pay the expenses. These expenses would not be considered taxable income to you since the money never came to you. And the convention is to develop your leadership skills, not for your personal pleasure (although you may enjoy it!).

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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