Should I start a homeschool co-op with volunteers or an academy with hired teachers?

I’m considering starting a homeschool group. How did you decide on a co-op with all volunteer teachers versus an academy with hired teachers? I think I have some moms who would be interested in participating, but I really don’t know yet.

I have briefly looked at your information and will continue to dive deeper, but would certainly love to hear your personal experiences, particularly if there is anything you would do differently.

Becky Abrams, a homeschool group leader in Oregon, and a consultant to other group leaders, has run both an all-volunteer co-op and an academy (she calls it a “hybrid homeschool program”) with hired teachers.

She has several blog posts at HomeschoolLeaders.com on paying employees.

Becky would be happy to do a phone consultation with you to sort through this decision. Contact Becky

Here’s a podcast interview I did with Becky about how she launched her all volunteer co-op. https://ultimateradioshow.com/necessity-leads-new-homeschooler-to-start-a-homeschool-co-op/


Additionally, my friend Jamie Buckland, of Classical Program Consultant has both hired teachers and used volunteers.

Jamie explained, “We, Appalachian Classical Academy (ACA), are a nonprofit organization with 501c3 tax exempt status and we employed teachers for three years and then went to all volunteers largely due to financial constraints. There are pros and cons to having volunteers. There are pros and cons to hiring employees!”

Here’s link to a podcast HomeschoolCPA did Jamie about why ACA employed teachers for 3 years.
https://ultimateradioshow.com/should-you-pay-homeschool-teachers/


Tips and Advice

From the experience of both these leaders, I have some tips to help you make this decision:

What experience do you have in running a homeschool group? Have you been on the leadership board of a homeschool group? If you are not very experienced (at least 3 years as a leader of a group) I would stick to the all volunteer co-op. Running a hybrid/academy with paid staff if significantly more work and responsibility that a co-op.

Do you have any experience in hiring and paying employees? If not, start with the all volunteer co-op. Then work at finding a payroll company and a good Treasurer and bookkeeper. You’ll need all three if you run an academy with hired teachers.

What are the ages of your children? If they are young (elementary age), stick with the all volunteer co-op. Don’t sacrifice your own children in attempting to homeschool other peoples’ children! As your children grow older consider adding a few paid instructors and grow into a full fledged academy as your experience grows.

Do you have the time, mental, and emotional capacity to research daycare licensing, employer laws, payroll companies, background checks, increased bookkeeping and cash management that come with an academy?

Are you doing this alone or do you have a strong board? Without a strong, active board, you will not succeed in launching a hybrid/academy. You may not even pull off a small volunteer co-op with out a strong board.
So get a board! They will help you make this decision. If you lack their full support and availability to take on an academy with hired teachers, don’t do it! Wait. Grow slowly.


Are you paying workers in your homeschool organization?
Carol Topp, CPA ‘s book Paying Workers in a Homeschool Organization. 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.


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Worker Classification Test By State

I found this helpful website that explains the test that each state in the US uses to classify workers as employees for Independent Contractors.
This is important for homeschool groups that hire and pay workers, especially teachers or tutors, to understand.

https://www.wrapbook.com/blog/worker-classification-tests-by-state

The article compares the two main tests:

Common law test (presumes the worker could be a contractor)

and the

ABC test (presumes the worker is an employee)

The Common Law test is used by the IRS, New York, the District of Columbia, and 17 other states

Currently, the ABC Test is used by the U.S. Department of Labor and 33 states.

Visit https://www.wrapbook.com/blog/worker-classification-tests-by-state and look up your state. Then determine if you pass the tests for your state and the IRS!


If you are unsure how to classify the workers in your homeschool group, HomeschoolCPA can help:

My book Paying Workers in a Homeschool Organization can help clear a lot of confusion, but perhaps you want to discuss your particular situation in a private, individual phone consultation.

I offer phone consultations to help you determine if your homeschool organization’s workers are employees or independent contractors. The phone call will be followed up with an email containing a fact-based determination and information to help you take the next steps.

To request a consultation, please contact me. I’m happy to help and relieve any anxiety you have about this confusing topic.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Biden’s DOL adopts ABC test for workers. What does this mean for homeschool groups?

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.”

“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)

https://www.freechurchaccounting.com/misclassification-of-workers.html

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:

  1. The homeschool group controls the teacher (you have to control the teachers for the safety of the children) and
  2. 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/

https://homeschoolcpa.com/californias-new-abc-test-for-independent-contractors-how-will-it-affect-homeschool-groups/

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
Helping Homeschool Leaders

Liabilities that CC Directors carry

I have been concerned for many years about Classical Conversations Directors and the liability that they carry when they sign a licensing agreement with CC.

My main areas of concern include:

Areas of liability for CC Directors

Safety of children participating in the Community day including physical, health and safety concerns. This means that the Director should be conducting Background checks on all participants. She also needs to have a two-deep policy meaning that two adults be in the room with children at all times. The Director needs to follow state guidelines on COVID-19 precautions and other health codes.

Building use which includes a rental lease agreement, property insurance, fire codes, conducting fire drills, ensuring the building is safe and secure.

Potentially jeopardizing the church’s property tax exemption by operating a for-profit business in a church.

Business licenses and business registration.

Daycare licensing if the Community has a nursery or childcare for pre-school children.

Hiring tutors. Training tutors. Employment agreements. Paying tutors as employees not Independent Contractors. Potential fines and penalties for misclassifying workers. Payroll processing, including payroll taxes.

Illegally using volunteer labor. Businesses cannot use volunteer labor. They must pay everyone working in their business.

Tax reporting of their own income and expenses as well as Form 1099-NEC reporting to the tutors and other workers.

Fiscal management including invoicing families, record keeping, paying bills, paying tutors

Conforming with all CC licensing requirements on delivering the program, hosting informational meetings, attending Practicum training, submitting to the Support Reps, Area Reps and others up the CC chain of command.

Mandatory reporting requirements of suspected child abuse or neglect. The Director will need to be eyes and ears everywhere.

Negotiating conflict between families, between parents and tutors, between children (bullying), etc. If not handled well, these can result in lawsuits against the Director as the businesses owner.


Nonprofit homeschool programs face some of these issues (but not all), but they have a board of leaders and volunteers to help comply with all these areas. All the responsibility is not on one person in a nonprofit organization.

CC Communities are different. CC Corp pushes all the liability for the operation of the Community onto the shoulders of the local licensed Director. She is carrying this burden alone.

Read more about directing a CC Community

If you’d like to hear a former CC Director address the issue of liability on CC Directors, watch her video at : Former CC Director explains the liability that she carried as a Director

If you want to investigate the reality of being a CC Director join these Facebook groups:

Let Us Reason for Real Facebook group

Talk Classical Conversations
Their are CC-endorsed Facebook groups, but they are heavily monitored and do not encourage open discussion or allow questions that may seem critical of the program or CC Inc.. So alternate groups like these have been formed.


I know this is a sobering topic. My concern is that CC Directors fully understand what they are getting into before signing (or resigning) a licensing agreement.

There is a better, easier way to run a homeschool organization that doesn’t involve one person carrying all this liability. It’s called running a nonprofit homeschool program independent of a CC licensing agreement. Thousands of homeschool leaders have been doing that for decades.

Read my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out and join this Facebook group I am a Homeschool Group Leader


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Parents paying homeschool teachers is getting cumbersome

paperworkrejection_istock

Hello Carol,

I am the Executive Director of a 501(c)3 non-profit homeschool co-op. We have always had all parents pay teachers directly for classes. Of course the number of checks written by members each semester,and unraveling the missing/lost checks each semester along with the myriad of other payment mysteries has prompted to us to wonder if we can have all parents submit the teacher payments to our group, then we cut a check to each teacher.

We would essentially gather all the money and then direct it to each teacher. One check from each parent for all their children’s classes, and one check to each teacher for all the classes they are teaching.

Can we do this?

Holly

Holly,

Thank you for contacting me.

Yes, you can collect all the payments from parents and then pay the teachers. This is how many homeschool groups, private schools, and college operate. But there are some things to warn you about:

1. Managing more money means you need good accounting software (links to some of my blog posts with software recommendations), one that can invoice parents and track who has paid and who still owes.

2. Additionally, since you have a lot more income, you may have crossed an IRS threshold and now need to be filing the annual Form 990 or 990-EZ (YouTube video explaining which form you need to file).

3. Worker classification. You need to determine if the teachers are employees or  Independent Contractors (opens a blog post series on worker status). This is not an easy determination to make. You need to consider many factors.


I also offer phone consultations to help you determine if your homeschool organization’s workers are employees or independent contractors. The phone call will be followed up with an email containing a fact-based determination and information to help you take the next steps. Worker Classification consultation.

Save

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Paying Workers in a Homeschool Organization Part 2 podcast

DollarsSenseShow18

UPDATE: I aired this podcast originally in 2014, seven years ago. It’s still very useful and paying workers is a topic that come up frequently for homeschool group leaders. I’ve updated this blog post with a few changes of IRS forms and links.

Do you pay workers in your homeschool organization?

Do you know what form to to filing with the IRS?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 2 of a 2 part series.

Listen to the podcast

Be sure to listen to the first part of this podcast (Episode #17) where Carol explains the difference between employees and independent contractors.

Show Notes:

Applying for EIN. Use IRS Form SS-4. Read this helpful article first Getting an EIN from the IRS. (updated link)

IRS forms to give to independent contractors (IC).

  • Use IRS Form W-9 to collect the IC’s legal name and EIN.
  • Read IRS Pub 15A Employers Supplemental Tax Guide.
  • Give Form 1099-MISC (UPDATE: as of Jan 2021, the Form is now 1099-NEC Nonemployee Compensation) to every IC paid more than $600 in a calendar year. Unfortunately Form 1099-MISC (now 1099-NEC) cannot be printed on your home printer. You must order them from the IRS or buy a set at an office supply store. I use FileTaxes.com (now called Yearli.com) to file and mail Form 1099-MISC. Yeali’s fee is now $5.50-$6.50 per 1099-NEC. (2021)

IRS forms to give to employees

  • Collect a W-4 and an I-9 (Immigration) from each employee. Get employment forms at IRS.gov
  • Read IRS Pub 15 Employers Tax Guide
  • Give each employee a W-2 at the end of the year. (I recommend Yearli.com to file and mail the W-2’s to employees)
  • Form 941 or 944 to pay your employer taxes (Social Security and Medicare). Find employment forms at IRS.gov.  I use Yearli.com to prepare and file 941/944.

What to do if you are paid by homeschool organization an receive a 1099-NEC?

  • File Schedule C Profit or Loss from Business of the Form 1040. List all your income and expenses from being a independent contractor.
  • Pay federal income tax and  self-employment tax (same as Social Security and Medicare for self-employed people) using Schedule SE (attached to your Form 1040.

Helpful Resources

Money Management in a Homeschool Organization

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization

And if you are a workers in a homeschool organization and receive a 1099-NEC or need to report your earnings even without an 1099-NEC, this ebook will be very helpful:
Taxes for Homeschool Business Owners


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Paying Workers in a Homeschool Organization Part 1 podcast

DollarsSenseShow17

UPDATE: I first aired this podcast episode in 2014, 7 years ago! How to pay workers is still a common question and issue faced by homeschool groups leaders, so I am updating this post (mostly about my book Paying Workers in a Homeschool Organization which is now a full fledged 130 page book). The podcast is the original from 2014. An oldie, but a goodie!


Do you pay workers in your homeschool organization?

Are they employees or independent contractors? Do you know the difference?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 1 of a 2 part series.

Listen to the podcast here.

Be sure to listen to the second part of this podcast when Carol shares what forms you need to be filing with the IRS when you pay workers.

Helpful Resources

Carol mentioned a few helpful resources:

Paying Workers in a Homeschool Organization 

Money Management in a Homeschool Organization


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

How can our board members lead and get paid for it?

Hi Carol,
We have questions about how and if we are able to file as a 501(c)3 so that our directors can continue to lead the group while getting compensated for their time and efforts. Do you have any resources for this type of information?

Thank you for your time,

Lisa R

Lisa,

You asked an excellent question about how “our directors can continue to lead the group while getting compensated for their time and efforts.”

It is very difficult and sometimes not possible or desirable to compensate your board members. It creates conflicts of interest, self-dealing and could be forbidden by your state nonprofit laws and even exclude your organization from being granted 501(c)(3) tax exempt status by the IRS.

I’m glad you mentioned that you are in California because California has a law that forbids more than 49% of a nonprofit board to be composed of compensated individuals (or their family members).

This website (from nonprofit lawyers in California) explains the 49% rule:

Under California Section 5227, not more than 49% of a public benefit corporation’s governing body may be composed of “interested directors,” defined as –
(a) Any person who has been compensated by the corporation for services within the last 12 months, and
(b) Any member of such a person’s family.

Source: https://www.adlercolvin.com/what-every-nonprofit-b…
Scroll down to C. Conflicts of Interest and read the entire section.

One more resource in plain English is The California Attorney General’s Guide to Charities. http://npocpas.com/assets/guide_for_charities.pdf….
Go to page 20 and read 3. Duty of Loyalty and Conflict of Interest.


So in a nutshell, your board members need to be independent from conflicts of interest. Being compensated creates a conflict of interest.

I discourage nonprofit boards from being compensated. Most nonporift advocates encourage board members to serve as volunteers.

But you have two options:

Your board needs to be large enough that the individuals being compensated are the minority and are not guilty of self dealing or conflicts of interest. That may be very difficult to do.

Or the other option is to hire help like a bookkeeper or administrative assistant who would not be board members. This may free up the board to serve as volunteers and then have no conflicts of interest.

My book that addresses paying board members is Paying Workers in a Homeschool Organization

I hope that helps,

Carol Topp, CPA

1099-NEC replaces 1099-MISC for most homeschool groups

The IRS has introduced a new form called the 1099-NEC (for Non Employee Compensation), that will replace the Form 1099-MISC for most homeschool groups and homeschool businesses like Classical Conversation Directors.

The 1099-NEC is the form your homeschool group must give to any individual that you paid more than $600 in 2020. That might be your co-op teachers, CC tutors, or independent contractors like a web designer.

It is due to the worker by January 31, 2021. A copy gets send to the IRS as well, along with a Form 1096 Summary sheet.

The Form-NEC is quite simple. You simply fill in your organization’s name, address, and Taxpayer ID Number (TIN) more commonly called your EIN (Employer Identification Number).
Then also fill in the worker’s name, address, Social Security Number and the total amount they were paid in 2020 in Box 1.

How to file a 1099-NEC

Unfortunately, you cannot download and use the Form 1099-NEC found on the IRS.gov website. It has a special red ink that home printers do not duplicate correctly for the IRS machines to read.

Instead of using paper, I recommend Yearli.com as an online service I use to file Form 1099-NEC. Yearli mails a copy to your worker, sends a copy to the IRS, and creates a pdf file for you to keep. Easy! And it’s Core plan is FREE! The Core plan should be enough for most homeschool groups.

Learn more about paying workers

Paying Workers in a Homeschool Organization

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 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.

Are hired homeschool teachers household employees?

Hello Carol!

I graduated from college in May and am currently working on my masters degree in Elementary Education. A friend put me in contact with one of her family friends for a job opportunity as a homeschool teacher while I complete my degree. I do not work for a tutoring company nor do I teach any other children besides the ones in this family.

My employer said he would send me a 1099 at the end of the year and is not withholding any income taxes from my paychecks. I am wondering if I should be paid as a household employee.

I am wondering how much I should expect to put aside for taxes.
Emma

Hi Emma,

Congratulations on your recent graduation.

Other CPAs may disagree with me, but I do not think that teachers or tutors are household employees. The IRS has a list of occupations that qualify as household employees, that is workers who do household work: “housekeepers, maids, babysitters, gardeners, and others who work in or around a private residence as an employee.” Teachers and tutors are not mentioned in that list.

The IRS explains that “Repairmen, plumbers, contractors, and other business people who provide their services as independent contractors, are not your employees. Household workers are your employees if you can control not only the work they do but also how they do it.” (emphasis added)

So since your “employer” is treating you as an Independent Contractor, you are not a household employee.

It is debatable if being treated as an Independent Contractor is the correct classification for you. You may be the family’s employee (but not a household employee), if the family directs and controls your work. I cannot determine if you are correctly classified as an Independent Contractor from what you told me.


I usually recommend that self employed workers set aside 20%-30% of their pay to federal income taxes. You will pay both federal income and and self-employment tax, which is Social Security and Medicare taxes for self-employed people. Self-employment tax is 15.3% of your net earnings (i.e., your profit from being an Independent Contractor ). Then depending on your state, you may set aside a bit more for state income taxes; I estimate about 5% for state taxes.

So that’s a total of 30-35% of your pay for federal income tax, self-employment tax and state income tax.

Ouch!

I hope the family is paying you well!


I have a helpful ebook ?Taxes for Homeschool Business Owners that will be very  helpful to you as you prepare your taxes for 2020.

Carol Topp, CPA
HomeschoolCPA.com
Helping homeschool leaders