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



Looking ahead to 2021 for HomeschoolCPA: Weddings, retirement and more!

Most of us are happy to wave goodbye to 2020 and look ahead to 2021! HomeschoolCPA agrees.

I’m looking ahead to 2021 when both of my daughters will be getting married! And the weddings are planned to be only 5 weeks apart in early March and mid-April 2021.

Two weddings to plan in one year is keeping me very busy! Planning two COVID weddings is even more difficult!

You may have noticed I’ve not posted a blog post in over a month and not kept up with my podcast either. Now you know why!

Retirement and semi-retirement

In May 2021, my husband will be retiring. He will turn 60 (!) and his employer is giving an incentive for him to retire, so the timing seemed to work well!

I’m going to be semi-retiring as well, so that we have the flexibility to travel (post COVID) and do other things together. And I have really been enjoying my hobby of painting and want to pursue that more.

Carol Topp posing with “Roebling Bridge” her first piece chosen for an art exhibition in 2019.

HomeschoolCPA will still be here!

So even though I plan to semi-retire, this website will still be here offering helpful information for homeschool leaders. My books and webinars are still available. I may be airing previous podcasts episodes that are still helpful to homeschool leaders.

You will see some new faces. I’ve mentored several people over the past few years and they will be sharing blog posts and perhaps some podcast episodes in 2021. These are people I trained and trust that they can serve you well. I’ll be introducing them a bit later in 2021.

So later in 2021, you’ll be encouraged to turn to one of my mentees for questions, advice, phone consultations, and help getting and maintaining 501c3 tax exempt status.

I’ll be here if my mentees run into a complex situation and want guidance.

So that’s my plan for 2021: two COVID weddings, semi-retirement, and mentoring others to help homeschool leaders so I can travel and paint more! Sounds like a great plan.

But as 2020 taught us, anything can happen! We just do our best and carry on!

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Summer Special: Business Consultation for CC Directors

Classical Conversations (R) Directors are advised to seek advice from a Certified Public Accountant (CPA) about running their CC business, yet many Directors do not do that for several reasons:

  • It’s too expensive
  • The Director doesn’t know any CPAs
  • The CPA doesn’t understand homeschooling or CC
  • It’s inconvenient (what to do with the kids?)

Here’s a summer special just for CC Directors that solves all those problems!

Get a 50 minute business consultation by phone with Carol Topp, CPA and Stephanie Patrick, a former CC tutor and Director.

The price is only $50
. That’s half the usual rate for Carol’s professional time and expertise and you get Stephanie’s experience as a Director and Tutor as a bonus!

Or gather other Directors and pay $75 for 2 people on the call or $100 for 3 people! All Directors will join in a conference call to practice social distancing!

This is a limited time offer (only two months this summer) with limited availability (four time slots a week on Tuesday afternoons).

During our call we can discuss any of these topics:

  • Is my CC Community a business or a ministry?
  • Should I be paying my tutors as employees or Independent Contractors?
  • How do I pay myself?
  • Paying my church-host: Is it a donation?
  • Giving refunds and discounts (especially because of COVID-19 cancellations)
  • What tax deductions can I take?
  • Should my business be an LLC?
  • Do I pay my CC business for my children’s tuition?

There are so many questions you may have that we may have to limit them to your top four issues.
But there are resources to help you run your CC Community including:

Book your consultation today. This is a limited time offer and there is limited availability (four time slots a week on Tuesday afternoons).

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Missing your homeschool group because of COVD-19? Join other leaders on Facebook

COVID-19 probably means your homeschool group has cancelled meeting for several week.

It gets lonely without our regular homeschool groups, doesn’t it?

Well, now might be the time to meet other homeschool group leaders who know how you feel.

I moderate a Facebook group called

I am a Homeschool Group Leader

Come join us at https://www.facebook.com/groups/72534255742/

We are about 1200 homeschool leaders from across the USA (and a few foreign countries) who share tips, information, and offer encouragement and support.

We talk about all kinds of things from problem parents, finding volunteers, managing activities, and cancelling groups because of the corona virus.

Now more than ever, we need each other and technology can help us get through this very difficult time.

Thanks for all you do in running your organizations! You’re my heroes!
See you on Facebook!

Carol Topp, CPA
HomeschoolCPA.com

Paying Volunteer Teachers

A homeschool leader asks if the way her group pays volunteer teacher is legal.

Holly, a homeschool group leader emailed HomeschoolCPA Carol Topp this situation:

“I need guidance on the method with which our organization’s volunteers are paid teacher fees. We are collecting cash from all the members for their children’s class fees, and redistributing it to the teachers for their class payment.

Apparently this is being done to simply the process and so members do not have to write checks. I am concerned this is an illegal practice.”

Listen as Carol explains:

  • Whether this is legal
  • Are these teachers really volunteers?
  • Should the teachers be employees or Independent Contractors?
  • What Holly’s organization needs to do regarding paying teachers
  • A simpler option

Featured Product

In the podcast I mentioned my book

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.

Meet Carol Topp, CPA in South Texas Feb 25-27, 2020

I’m excited to visit south Texas in February 2020 and get to meet and speak to homeschool leaders in San Antonio, Austin and Houston!

San Antonio: Tuesday February 25, 2020
from 7:00 to 8:30 pm
on the lovely grounds of
Family Educators Alliance of South Texas (FEAST)
7735 Mockingbird Lane • San Antonio, TX • 78229
Register here for San Antonio

Austin: Wednesday February 26, 2020
from 6:30-9:15 pm
at
Calvary Worship Center (North Austin, close to TX 45 & N Mopac Expy)
14901 Burnet Road
Austin, TX 78728 
More information and to RSVP for Austin

Houston: Thursday February 27, 2020
from 6:30-9:15 pm
at
University Baptist Church  (Chapel area)
16106 Middlebrook Dr
Houston, TX 77059  
More information and to RSVP for Houston

The San Antonio event is sponsored by Family Educators Alliance of South Texas and the Austin and Houston events are sponsored by Texas Homeschool Coalition with much appreciation!


Each event will have:

  • A brief session presented by Carol Topp, CPA, the HomeschoolCPA on “Topp Tips for Running a Homeschool Organization”
  • A Town Hall session for you to ask question and get advice from other homeschool leaders
  • Q&A time with Carol Topp, CPA
  • A chance to look at HomeschoolCPA’s books
  • An opportunity to be encouraged by other leaders who understand you!
  • A shot in the arm much needed at this point in the year
  • Professional advice on finances, legal structures, taxes, employees, insurance, etc.

I hope to see you in San Antonio, Austin or Houston!

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Only two more days to get Taxes for Homeschool Business Owners for free

Taxes for running your tutoring business, homeschool business or CC Community can be so confusing!  I have a book that can help.

Taxes for Homeschool Business Owners

Over 700 tutors, directors and teachers have downloaded the ebook so far. Here’s what they say:

Thank you so much for the tax resources you put out there, it’s been super helpful for me as a director of our CC Homeschool campus! -Jessica

As we do our taxes this year I am thankful for your knowledge and being willing to share it. I GUARANTEE many women WEREN’T doing their taxes correctly. -Julie

This ebook is a great resource for:

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

The ebook was FREE in January 2020. Now the ebook is available for $10.

The ebook is 60 pages long and contains information on

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

I hope you find the ebook helpful!

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

End of Year Tasks for Nonprofit Homeschool Groups

Happy New Year! In the new and out with the old.

But wait! Not so fast!

There are several tasks a nonprofit homeschool group needs to do to finish out the prior year before forging ahead.

1. Wage Form W-2 to employees by January 31st:  Your treasurer should furnish Form W-2 to employees who worked for your organization during the past year by Jan 31st.
The cover sheet for the W-2s, called a transmittal form W-3 transmittal form is due the end of January as well.

2. Independent Contractor Form 1099-MISC are also due January 31. Provide a Form 1099-MISC to individuals paid $600 or more in 2019 for performing a service for your nonprofit. Like the W-2s, the 1099s have a cover page, Form 1096 transmittal form that is also due by Jan 31st.

In 2020, the IRS will be replacing the 1099-MISC for non-employee compensation with a separate form called 1099-NEC. It will be used in early 2021 to report 2020 payments to independent contractors. Click here to see the IRS draft.

PaperW-2s and 1099-MISCs are a nuisance to fill in and mail, so do what I do and file online.
I used a service called Yearli.com for years. They are fast, easy and inexpensive.
Check them out! https://mbsy.co/rzrbp
Using this link gets you a 15% discount and (full disclosure) I make a small commission.

The start of a new year is a great time to determine if your workers should be classified as an employee or independent contractor.

Worker misclassification is a serious issue and can cause significant financial hardship and has caused several businesses to close. Penalties for misclassifying a worker as an independent contractor are very stiff and strictly enforced so now is a good of time to make sure every one of your workers are properly classified. Read more here

My book Paying Workers in a Homeschool Organization will help to determine if a worker is an Independent Contractor or employee.

For more specific advice, I offer a Worker Classification Consultation.


3. Contribution statements for donations your nonprofit received in 2019. A donation is recorded when it is received even if you don’t deposit the check until the new year. The only exception to that rule is if you receive a check in the mail and the envelope is dated December 31st or before. You can count that as a donation in 2019.
Your contributions statements to donors should be mailed in January so donors can prepare their tax returns.

Those tasks will keep your treasurer (or hired bookkeeper) pretty busy in January!

If you’re needing bookkeeper, I recommend Mary Musick, CPA (inactive) and current homeschool mom. Mary runs a bookkeeping service and can help your homeschool nonprofit with bookkeeping and payroll. Her email is hfbkkpg@gmail.com.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders