Search Results for: Classical Conversations

Classical Conversations knowingly exposes churches to tax liabilities

(Photo Courtesy of JJ Veale

Classical Conversations, Inc. (TM), Inc. has been the subject of two investigative reports written by Josh Shepherd in 2021.

I was interviewed by Josh and quoted in the first article Whistleblowers Say Classical Conversations is Multi-Level Marketing Scheme that Exploits Homeschooling Parents.

I shared some background information in my blog post Does Classical Conversations Exploit Homeschooling Parents?

The second article titled “Classical Conversations Knowingly Exposes Unsuspecting Churches to Tax Liabilities, Sources Say” was released last week.

It reveals that in addition to exploiting homeschool parents, Classical Conversations knowingly and deliberately has been exposing churches to property tax liabilities.

Background


I first became aware of the problems with Classical Conversations “communities” (they are really businesses owned by a licensed CC Director) in 2017 when a CC Director in Illinois emailed me. She was having difficulty finding a church to host her CC business (what she called “a community”).

I replied to her question and explained the churches were concerned about their property tax exemption.
I thought Illinois was a particularly stringent state and did not think this was a wide spread problem. I was wrong. Very wrong!


Then in 2018 I heard from a CC Director in WA State having the same problem.

I started to realize that CC meeting in churches could be a problem in many states!

After hours of research, calling tax assessors and helping scores of CC Directors, Jamie Buckland of Classical Homeschool Consultant has determined that 47 states have restrictions on for-profit businesses using tax exempt property of churches. Only KY, TX and OK seem to not care much about for-profit use of a property-tax-exempt church building.

In April 2019, a pastor emailed me and explained he has received an anonymous letter with links to my website. This was the first time I’d heard of this letter.

I gave him a lengthy reply.

Then it all exploded!

Letters to churches expose the truth

Robert Bortins CEO of Classical Conversations, Inc. hosted a webinar for CC directors to discuss their opinion on CC “Communities” meeting in churches. The webinar was transcribed by one of the attendees and sent to me.

We also found out that the letter originated in Cincinnati, Ohio, …
Um, one of the accountants that they linked to in their letter lives in that state as well and so we followed up with that CPA to find out if we could discuss this matter with them, you know, as Christians are called to do and also offered to let her speak with our legal counsel so that she could gain a more full view of the matter that was referenced in the letter and that was referenced on her website. Unfortunately, she declined such an invitation. And so of course, that was sad to hear because we wanted to make sure she was well-informed of the laws as well.

Robert Bortins, transcript of “Q and A with Robert Bortins” webinar April 17, 2019

He implied I had sent the letters.

I didn’t. Why would I? I had already posted two blog posts that the letter referenced years earlier.

Robert Bortins came very close to committing slander against me during that webinar. I believe Robert Bortins did commit slander and libel against me in private conversations and tried to ruin my reputation and my business based on social media posts shared with me.

slander: the action or crime of making a false spoken statement damaging to a person’s reputation; make false and damaging statements about someone.


I did not send the letters. I do not know who sent the letters. I had no involvement in these letters sent to churches.

Nasty emails came my way like this one:

Because of you, my community has no place to meet. We are moms sacrificing a lot to live off of single incomes to stay home full time with our kids. I hope the money was worth it to you because obviously you don’t care about the people you’re speaking to. Such a stereotypical accountant. Actually, much nastier than any accountant I’ve met. 

Noelle, an angry CC mother

I visited an attorney and she advised me to reply individually to emails which is what I did. She also reminded me that I did not need to speak to CC’s legal counsel to “gain a more full view of the matter” or “be informed on the laws” by CC, Inc. or their legal team. If I need legal counsel, she would provide it to me or recommend another legal expert on property tax law.


FAQ on Churches and CC

In an attempt to get clear information to homeschool groups, CC Directors and churches I wrote a FAQ page. It was referenced in the article on The Roys Report.

And I wrote a a follow up blog post Tax Assessor Clears Confusion on CC Communities Using Churches that was also referenced in the investigative report by Josh Shepherd.


My real concern is for the churches who were innocently or ignorantly (or perhaps deliberately) deceived by CC Directors. The Directors hid the fact that they were business operating in a church.

Some were ignorant of why they were instructed by CC, Inc. to tell a church host “We’re just a bunch of homeschool moms” or “we’re a Christian homeschool program.”

CC Directors, as instructed by CC, Inc., hid the fact that they were businesses operating in a church. Some Directors had the gall to ask for free rent for their “community” (remember it’s really their business) too!

There is a saying that a whole truth told as a half truth is a whole lie!

Yes, CC communities are “a bunch of homeschool moms.” That’s a half truth told as a whole truth. The half omitted is that the CC “community” is a BUSINESS!

The local CC Director may not have understood the difference prior to 2019, but CC, Inc. has understood the difference since at least 2016, probably much earlier! In fact, they sent a cease and desist letter in June 2016 threatening financial damages to a CC mom, April Palmer (as mentioned in the article), who told ten local churches that the CC communities they were hosting were profit businesses.

A homeschool mom tells ten local churches the truth and CC Inc. threatened her with a lawsuit.

Why?

Telling the licensed Directors and churches the truth would damage their business model which depends on churches not knowing the truth that CC “communities” are businesses owned by each Director. It’s crass to say, but it’s all about the money to CC Inc.


My concerns for churches and homeschool groups

I am concerned for churches potentially facing property taxes like the two mentioned in the article and perhaps unrelated business income tax because they believed they were hosting a legitimate nonprofit homeschool program.

And I am concerned that all homeschool groups may be viewed suspiciously by churches. This can make it harder for the legitimate, honest nonprofit homeschool groups to find church hosts (post COVID). I’ve been told of churches now asking homeschool groups for IRS 501c3 determination letters to prove the group is a nonprofit organization.

Shame on CC Inc. for making churches suspicious of all homeschoolers.

Shame on CC Inc. for putting churches at potential risk of incurring property tax.

Shame on CC Inc. for duping your own customers (i.e., licensed Directors), by not explaining the full truth to them, exposing them to potential liability (owing payment of a property tax bill to the church).

And shame on CC Inc. for not changing their business model back in 2016 (or earlier) and instead continuing to reap large financial rewards while putting all the risk and liability on CC Directors and churches.



Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Does Classical Conversations exploit homeschool parents?

Classical Conservations Inc. CEO Robert Bortins Jr. addressed thousands of homeschooling families in a simulcast broadcast from Albemarle, North Carolina on October 18, 2017, . (Image: Screenshot / YouTube)

Josh Shepherd an investigative journalist, has been researching the business practices of Classical Conversations for several months.

He released an article on the Roys Report titled “Whistleblowers Say Classical Conversations is Multi-Level Marketing Scheme that Exploits Homeschooling Parents” at https://julieroys.com/does-classical-conversations-exploit-homeschooling-parents/

It’s an interesting, eye-opening, and thought provoking articles. I was interviewed by Josh Shepherd for the article and I am quoted in it several times because I have had so many conversations and business consultations with CC Directors in the past few years.

Background on Classical Conversations’ business model

Classical Conversations is a unique homeschool business. It offers curriculum to homeschool families and once -a-week “communities” where “tutors” display to the students and parents how to implement the curriculum in their homeschool. The “communities” have the feel of a nonprofit homeschool co-op, but the “communities” are almost always for-profit businesses owned and operated by each Director. Each Director agrees to a licensing agreement with Classical Conversations Inc. that is similar to a franchise agreement. Each Director sends a significant portion of her income back (averages about 15%) to CC Inc. as a licensee, much like a franchise operator does.

I became aware of the franchise-like business structure of CC, Inc. and its Directors around 2015. In 2017, I became more and more concerned as I spoke with many CC Directors at homeschool conventions and via email and found they were very confused. Many did not realize they had agreed to operate a business. Many had made significant mistakes on their tax returns. I began creating several blog posts on my HomeschoolCPA.com website to clear up their confusion.

My concern is now and always has been for the individual Directors because I care about homeschool group leaders. I want CC Directors to have the information they need to make a wise decision before they become CC Directors. I also want them to stay out of trouble with the IRS and state and local authorities.

Taxes for CC Directors ebook


As early as 2013 I offered more than once to write an ebook for CC Directors to a local CC Area Representative in Ohio. I never heard from CC Inc., so in the fall of 2017 I decided to write a book myself and help the poor, confused CC Directors I had been hearing from stay out of trouble with the IRS.

I told Robert Bortins, CC Inc. CEO at the 2017 HSLDA National Leaders Conference that I was writing a book titled Taxes for CC Directors and he thanked me for the support I gave to CC Directors.

In November 2018, I received an email and arranged a phone call with Keith Denton, COO of CC Inc. They wished to have distribution rights to the ebook. I thought that would work well, since I would find it difficult to reach CC Directors myself to tell them about the book. (I am not allowed to join Facebook groups for CC Directors since I am not a Director myself.) So I agreed. CC paid me $2,500 for the sole rights to distribute the ebook.

I sent Keith Denton my initial version of the book on Taxes for CC Directors in January 2019. After 1400+ corrections and additions by their attorney and two months later, CC added the 60 page ebook to their Directors Licensing Guide, a rather large online-only guide for licensed Directors.

Very shortly after (in August 2019) CC directors emailed me saying they could not access the ebook. Some people claim that CC bought the distribution rights and then “buried” the book. It made me wonder why they would pay for the rights and then not distribute it to each CC Director.


I rewrote the ebook after the major tax changes in 2019 and to appeal to a larger audience. I released it January 2020. It is now called Taxes for Homeschool Business Owners and available here.


CC Directors carry all the liability

My concern for CC Directors grew. I have concerns about the liability they take on when they agree to start a community and become a licensed Director for CC. They are responsible for:

  • Hiring workers (tutors) and correctly classifying them as employees, payroll processing and taxes, employee application and background checks
  • Building lease and rent, building safety and insurance, and potentially harming the church’s property tax exemption by operating a for-profit business on church property
  • Safety of children and all adults participating which includes physical safety, health and COVID precautions, and mandatory reporting of suspected abuse.
  • Daycare licensing if the community offers a nursery
  • Tax reporting including 1099-NEC or W-2 filings for workers and Schedules C and SE on their individual tax returns
  • Financial management including invoicing parents, record keeping, paying bills, etc.
  • Not using using volunteer labor or allowing Independent Contractors (i.e., tutors) or employees to volunteer
  • Business registration and licensing at the state and county level
  • Complying with all the requirements in the CC licensing agreement including operating the program, hosting information meetings, attending training sessions, etc.

That’s quite a long list of responsibilities and potential areas of liability for a CC Director.

How much does a CC Director actually make?

In the article Josh shared a chart of income and expenses from several CC Directors. The fee they must pay to CC Corp averages 23% of their total revenues. Most Directors paid 15% of their revenues to CC Corporate. The profit from all their efforts averaged $2,811 working about 20 hours a week for a school year. The profit ranged from a $5,772 loss to $12,603 profit.

I think this information will be helpful for potential CC Directors to examine and ask themselves if the potential profit is worth the hours that a Director must put in to operating a CC community.

Source: https://julieroys.com/does-classical-conversations-exploit-homeschooling-parents/
*Data supplied by Carol Topp, CPA. ^Director G used non-standard accrual accounting during the two years reported. The person recorded income over two semesters, yet had to pay all CC fees in the fall semester.

Many CC Directors tell me that they operate a community not to make a profit but to benefit their children with a classical education. I frequently hear, “I am a Director to help pay for my children’s tuition.” That’s very honorable, but that same purpose can be accomplished without taking on the financial, legal, and safety liabilities of running a CC program.

Almost all homeschool programs operate as nonprofit organizations with limited liability for their leaders and members. CC Communities are a noticeable exception. Nonprofit organizations also have a board or team of leaders to help carry the responsibility. CC Directors carry all the burdens alone since it is their business.

Is being a CC Director worth the liability?


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders



Homeschool mom has concerns about Classical Conversations

I’ve written several blog posts answering questions from Classical Conversations (CC) Directors regarding:

Usually these issues affect CC Directors the most since they are the business owners that carry the responsibility and liability for operating a licensed CC Community that is compliant with local, state, and federal laws.

But sometimes the individual families in a CC Community are affected by these issues as well.

Homeschool blogger at As for Me and My Homestead, Jamie, wrote a blog posts titled, “Why My Family Left Classical Conversations.” In her post she outlines several reasons her family left CC after four years.

If you scroll to the end, she explains several business practices that she found concerning enough to make the decision to leave behind a group of homeschool families she deeply enjoyed and loved.

Through all the rest of this, I pushed the nagging, “something isn’t quite right” issues out of mind, and tried to focus on the positives.  Fortunately for me, the person who brought the errata sheet to my attention also invited me to join a Facebook group where I learned more about Classical Conversations that went beyond the mistakes and poor curriculum.

Jamie writes about several issues that bothered her including:

  • CC Corporate calling themselves (and the Directors’ businesses) a “ministry,” which can be misleading
  • Communities (as for-profit business) using churches
  • Misclassifying tutors as Independent Contractors
  • CC Corporate and local Directors using teenagers and parents as volunteer labor

She calls these issues “the tip of the iceberg.”


It’s never easy to publicly criticize a homeschool program, especially if your friends are still enthusiastic about it.

Jamie ends her post with this wish:

My hope is that in reading this, other families will see that CC is a corporation that is not operating in a godly manner, while claiming the name of God, and will find out that they could do so much better with their money & time, than join a CC community.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Do I Give Classical Conversations a 1099-MISC?

Carol Topp starts a new feature on her Homeschool Leader podcast: Q&A with HomeschoolCPA. 

In this first Q&A session, she is asked by a Classical Conversations® Director of she needs to give Classical Conversations® Corporation a 1099-MISC for the licensing fees she pays them.

It’s an excellent question and Carol Topp, CPA explains the purpose of the 1099-MISC, who needs to get one, and why.


In the podcast Carol mentioned an online service she uses to prepare her 1099-MISC statements, Yearli.com.  If you use this referral link you save 15% and Carol makes a small commission.


In the podcast Carol mentioned her book Paying Workers in a Homeschool Organization. This 130 page book 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 and businesses.


CC Directors and tutors may find Carol’s latest book Taxes for Homeschool Business Owners to be useful this tax season.

And she’s giving it away for free, but only in January 2020!

The ebook is 60 pages long and contains information on:

  • Business Start Up
  • LLC status
  • Tax Deductions
  • Tax Forms
  • Sample Tax Returns
  • Self Employment Tax
  • Paying Yourself
  • Paying Others
  • Businesses Using Churches
  • Should My Homeschool Program Be a Nonprofit?

This ebook is a great resource for:

  • Tutors or teachers for a homeschool program paid as an Independent Contractor
  • Classical Conversations®Directors
  • CC tutors
  • Coaches, musicians, artists, etc. hired to teach at a homeschool co-op

Get your copy of the ebook Taxes for Homeschool Business Owners today Homeschoolcpa.com/TAXESHSBIZ

Classical Conversations Consultations

Summer 2020 Special Offer: 50% off phone consultations for CC Directors

For details on this special offer and to book your consultation visit: HomeschoolCPA.com/CCBiz

 

I provide several services for  Classical Conversations Directors, Support Reps, Area Reps and tutors

Business Consultation

Discuss via phone or video chat the best business entity for you: sole practitioner, single-member LLC, partnership or corporation. Cost $100/hour. Prorated for partial hours.

Tax Consultation

Review your individual tax return to check accuracy in reporting business income and deductions. Or discuss tax record keeping and tax planning before tax season.

Worker Determination

Determine if a CC Director’s tutors and other workers are employees or independent contractors. The service will include a phone or video interview and will be followed up with Carol’s determination in writing, recommendations of changes you should make, and the consequences and penalties of misclassification.

I will also explain the IRS relief programs and help you apply for the IRS amnesty program to avoid costly IRS penalties.

Tax Exempt Application

Assist in determining eligibility for tax exempt status, the IRS application, and state filing forms for a CC Community formed as a nonprofit organization.

________________________________________

A valuable resource for CC Directors. Many friends of mine are living with anxiety about their tax status.

Katherine, CC Director

Allow me to express my gratitude and deep appreciation for the professional honesty that you have presented in your blog about tax classification, specifically regarding Classical Conversations.

– Daniel, CC tutor

________________________________________

Contact HomeschoolCPA, Carol Topp, CPA, at Carol@HomeschoolCPA.com to arrange for any of these services.

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Should a Classical Conversations Director be an LLC?

I am a CC director. I am not sure what is the best option when it comes to register our community. A LLC or as a Sole Proprietor? Thank you so much for your help.

Maria

Maria,

By default, if you are the only owner of your business, you are a sole proprietor. You could consider adding LLC status to your sole proprietorship business if you want the limited liability protections that LLC status offers.

The reason that most businesses use the LLC structure is for limited liability. That means the liability is limited to your business and its assets and not your personal assets. I organized my own sole proprietorship accounting practice as an LLC  because I wanted limited liability and protection of my personal assets. LLC status can be added to your sole proprietorship business at any time. I ran my accounting business for 3 years and then added LLC status.

I recommend that you read up on LLC status (an article I wrote for authors, but applies to all businesses), how to get it, maintain it (there are things you should do like not co-mingle funds and sign contracts in the name of the LLC, etc) , and what is required in your state regarding fees and reports. Some states charge a one-time fee, some charge a yearly fee and annual reports.

My new ebook for CC Directors answers the most common questions I am asked by CC Directors about running a business including LLC status!


Since this is a website mainly for homeschool nonprofit organizations, I will add this note:

For a nonprofit organization, such as most homeschool groups, I typically do not recommend LLC status since nonprofit corporation status in your state brings similar protections of limited liability. 

Here is a podcast episode where I discuss Should Your Homeschool Group Be An LLC?

But Maria is asking about LLC status for her for-profit business, not a nonprofit organization, and my advice to her may be very different from my advice to a nonprofit organization.


I am not an attorney, nor am I offering legal advice. I recommend that you seek legal counsel if you have additional questions about Limited Liability Company status.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

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

 

Taxes for Classical Conversations Directors

UPDATE 2020: I have been told that the ebook Taxes for Licensed Classical Conversions Directors is no longer available in the most recent 2020 Classical Conversations Director’s Licensing Guide.

But you can purchase a copy of my latest ebook Taxes for Homeschool Business Owners. It is more up-to-date than the other ebook since there were major changes in the tax laws and forms in late 2018.

Last tax year I was asked a lot of questions about taxes by Classical Conversations directors and tutors. Things like:

  • What tax form should I to use to report my income and expenses?
  • What expenses were tax deductible?
  • What tax forms do I need to give to my tutors?
  • How should tutors be paid?
  • How do I pay myself as a CC Director?

Fortunately, there is an ebook in the works to help CC Directors titled:

Taxes for Classical Conversions Directors

The ebook is available only to Licensed CC Directors from Classical Conversations, Inc

You can find the ebook here

 

I recommend the following blog posts:

CC Directors: Do not give yourself a 1099-MISC

Tax return for a Classical Conversations homeschool business

I’m a Classical Conversations Director. Do I have to file any forms with the IRS?

Understanding Taxes for a small homeschool business


There is a lot to learn about running a business. I don’t mean to discourage you or anyone else away from operating a homeschool business. You provide a valuable service to homeschool families! I am offering this webinar to help you understand the tax implications:

I recorded a webinar on Tax Preparation for Homeschool Business Owners. It should be a lot of help to tutors, non-employee co-op teachers and other homeschool business owners! You can watch the recording at HomeschoolCPA.com/HSBIZTAXES for a small fee of $10.

Carol, thank you again for the webinar. It was one of the BEST webinars I’ve EVER attended. If you do hold another one, I would pay for it hands down. Totally worth the $10! -Denise, webinar attendee

“I actually don’t care for webinars at all – it is not my learning style at all and I struggle to focus, but this one was extremely value and had my attention”. -Mary, webinar attendee


Consult a local small business CPA. To find a local tax preparer I recommend two sources:

Both of these websites allow you to search for a local tax preparer who is knowledgeable about taxes for small sole proprietor businesses.

 

Carol Topp, CPA


Free Resource

In the ebook, I mention a bookkeeping spreadsheet for CC Directors. You can get the spreadsheet now (all it costs is your email!)

Download the spreadsheet here

 


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Tax return for a Classical Conversations homeschool business

We are a new Classical Conversations community set up as a single member LLC. We only had 2 students and so my tutor’s income was below the requirement for filing 1099s. Same for me. However, I saw that I shouldn’t be filing a 1099-MISC for myself. What should I be doing?

And what is considered profit for a CC community?

Esther

 

Thank you for emailing me your question about taxes and your Classical Conversations (CC) business.

As a single member LLC, you are a sole proprietorship and you report your income and expenses from your CC business on a Schedule C Profit or Loss from Business as part of your Form 1040.

All your income from the tuition and fees charged to your customers (i.e. parents) goes on line 1 Gross receipts or sales. In this example the total income is $4,500.

Your payment to your teacher(s) goes on Line 11 Contract Labor.  In this example a total of $2,250 was paid to independent contractors. Other expenses go in the categories listed in Part II of the Schedule C. Other expenses made the total expenses sum to $2,982 as shown on Line 28.

The profit is shown on Line 31. It is calculated  from Gross Income (Line 7 on the form) minus Expenses (Line 28). The profit is what you get to keep (and pay taxes on!) as the business owner. In this example the profit is $1,518. This amount will carried forward to the Form 1040.


There is a lot to learn about running a business. I have a webinar to help you understand the tax implications:

My webinar Tax Preparation for Homeschool Business Owners should be a lot of help to tutors, non-employee co-op teachers and other homeschool business owners! You can watch the recording at HomeschoolCPA.com/HSBIZTAXES for a small fee of $10.

Carol, thank you again for the webinar. It was one of the BEST webinars I’ve EVER attended. If you do hold another one, I would pay for it hands down. Totally worth the $10! -Denise, webinar attendee

“I actually don’t care for webinars at all – it is not my learning style at all and I struggle to focus, but this one was extremely value and had my attention”. -Mary, webinar attendee


P.S. I am no longer taxing new tax clients, so I recommend you find a local CPA to help you in preparing your tax return. To find a local CPA or accountant I recommend you try Dave Ramsey’s Endorsed Local Providers and Quickbooks Proadvisors. A lot of CPAs and accountants listed on these sites specialize in small businesses.

Carol Topp, CPA
HomeschoolCPA.com
Helping homeschool leaders

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I’m a Classical Conversations Director. Do I have to file any forms with the IRS?

On April 15 last year (you know, that day the personal tax returns are due!), I received this email:

I need to be sure I don’t have any tax forms to file with IRS. This was our first year as a CC community, with only 2 tutors and 12 children.
-Name withheld to protect the guilty

 

Just as aside before I answer her question: This CC Director treated her tutors as independent contractors all year long. That may or may not have been the proper worker classification for them. She may have exerted enough control over the tutors that they should have been treated as employees, but I did not address that issue with her. At this point, what the director did in the past with regard to paying her tutors is done; it cannot be changed now. I addressed what she needs to do now to properly file her taxes.

Dear Name withheld,

As a Classical Conversations (CC) director, you are a small business owner.

You should have given your tutors a Form 1099-MISC to report the income you paid them (assuming you classified them as independent contractors). The Form 1099-MISC is to be given to each tutor by January 31 each year for the income paid in the prior year. A copy is also sent to the IRS. It sounds like you missed that deadline.

By the way, you cannot simply print the Form 1099-MISC from the IRS website. You must order forms from the IRS, purchase them at an office supply store, or use an online filing program like Yearli.com (that’s the service I’ve used to file my 1099-MISC and my affiliate link).

You should also have reported your income and expenses from your CC business on your personal income tax return, using Form 1040 Schedule C Profit or Loss from Business.

If you had a profit of more than $400 for the year, you will also owe Self-Employment Tax. It is calculated on Form 1040 Schedule SE.


Taxes for 2018 will be very confusing with the new tax law changes and redesigned IRS Form 1040. I am offering this webinar to help you understand how to prepare your tax return:

I recorded a webinar on Tax Preparation for Homeschool Business Owners. It should be a lot of help to tutors, non-employee co-op teachers and other homeschool business owners! You can watch the recording at HomeschoolCPA.com/HSBIZTAXES for a small fee of $10.

Carol, thank you again for the webinar. It was one of the BEST webinars I’ve EVER attended. If you do hold another one, I would pay for it hands down. Totally worth the $10! -Denise, webinar attendee

“I actually don’t care for webinars at all – it is not my learning style at all and I struggle to focus, but this one was extremely value and had my attention”. -Mary, webinar attendee


I’m afraid Name-withheld is very late in filing these forms! She may owe a penalty for late filing your 1099-MISC forms. She may need to file an amended federal income tax return (Form 1040X)  if she failed to include her CC income and expenses. She may also need to amend her state income tax return.

I strongly recommend that Name-withheld contact a local CPA to discuss amending her federal and state income tax returns.

She may also need to address if independent contractor status is the proper classification for her tutors. My book Paying Workers in a Homeschool Organization can help determine the best classification for workers.

Carol Topp, CPA

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