Hi Carol,
Our co-op is a nonprofit corporation. Almost all of our tutors in the co-op are moms with kids in the program. The moms do not get pay in money for teaching but are offered “credits” against tuition.
1) Are we correct to assume that we are not dealing with either Independent Contractors (IC) or employees in this circumstance?
2) We have one tutor who gets “credits” and payment. Can we regard her as an IC if she submit an invoice?
We do have a few tutors whom we pay and we will need to look more closely into invoices and 1099 MISC.
Thank you so much for your advice. If these questions are covered in your ebook, please let me know.
-MG
Dear MG,
Thank you for contacting me. Let’s see if I can answer your questions.
1. Sounds like your tutors are volunteers. You thank them with tuition discounts (or “credits” as you call them). The more a person volunteers, the larger the discount/credit. There is no problem with doing that, except the “credits” are really a form of compensation for her services and are taxable income to the recipient. Your”volunteers” won’t like hearing that news!
Paying a Volunteer
2. Paying a volunteer gets very tricky. She’s no longer a volunteer because she is paid. She’s actually a mix; some volunteer and some paid. That’s what’s confusing. If you can clearly separate her volunteering from her paid tasks, then do that. For example, if she tutors and gets credits (which are taxable compensation) and then in addition designs your website for free, it’s pretty easy to separate those two jobs.
Super volunteers
But some people are what I call “super volunteers.” They volunteer so much beyond their discounts or credits that the organization pays them for their extra volunteering. But volunteers cannot get paid, so she’s either an employee or an IC.I cannot determine her worker status with the information you gave me.
If you want to treat her like an independent contractor, then she cannot receive benefits like tuition credits. The value of these credits need to be reported to the IRS and added to her taxable income.
I discuss this in Money Management in a Homeschool Organization. See Chapter 12.
The Money Management book will be helpful and so will my Paying Workers in a Homeschool Organization book, because it shows the forms needed for employees and Independent contrcators.
Carol Topp, CPA
