I subscribe to a lot of e-newsletters and a really good one is Free Church Accounting. Vicki Boatright has helpful bookkeeping advice for churches and nonprofits like homeschool groups!
Her latest article is about classifying workers as employees or Independent Contractors (IC) and the changes at the federal level (Department of Labor) made by the Biden administration in 2021.
https://www.freechurchaccounting.com/misclassification-of-workers.html
Here’s some highlights of what she says:
“The Biden administration expressed their desire to “pattern” the federal standard for classifying ICs closer to CA’s ABC Test. So earlier this year, the U.S. Department of Labor stopped Trump administration rules that utilized a five-part test for classifying worker and would have made it easier to identify and properly classify workers as ICs and started classifying ICs under the ABC Test.”
https://www.freechurchaccounting.com/misclassification-of-workers.html
“So how will this affect you? Well, unless your musician, custodian, or nursery worker owns their own business and does a similar “job” for other business and organizations, you should be paying them as employees.” (my emphasis added)
She goes onto give some helpful tips for classifying common workers in a church like nursery caregivers, custodians, musicians, etc. Then she really gets serious and mentions the severe criminal and civil penalties for misclassifying your workers as Independent Contractors.
This is serious and scary stuff!
She ends with this warning:
“Remember, a blaring red flag for the IRS is an individual who receives one 1099 from the same organization every year!”
https://www.freechurchaccounting.com/misclassification-of-workers.html
She sounds little bit like me, doesn’t she? I’ve been warning homeschool leaders for years that most teachers in a homeschool organization should be paid as employees because:
- The homeschool group controls the teacher (you have to control the teachers for the safety of the children) and
- The teachers provide the key activity of your organization.
Read her whole article. It’s worth the time.
Then read my book Paying Workers in a Homeschool Organization.
And these blog posts: https://homeschoolcpa.com/why-i-think-most-homeschool-teachers-should-be-paid-an-employees/
https://homeschoolcpa.com/what-are-the-consequences-of-misclassifying-a-worker/
And finally read about the IRS amnesty program if you’ve been paying teachers as ICs: https://homeschoolcpa.com/irs-amnesty-program-for-employers-how-to-avoid-penalties-for-paying-workers-as-independent-contractors/
Happy New year! (Ugh!)
Carol Topp, CPA
HomeschoolCPA.com
