I know there have been some recent changes to classification and in most cases paid teachers in a homeschool group should be classified as employees. What if parents pay the teachers directly? Is that allowed? Is it a good practice?Homeschool Leader in CT
Dear Homeschool Leader,
I have been hearing more and more groups switch to a plan where the parents pay their teachers directly, rather than the homeschool group itself paying the teacher.
Vendor Hall approach
I compare this parents-pay-the-teachers-directly model to a vendor hall at a convention. Have you ever been to a homeschool convention? I’ve been to conventions both as an attendee and as a vendor. Each vendor sets up their booth and sells product or gives demonstrations to the convention attendees. Each vendor is an independent business owner. The convention organizer has no say in how the vendor runs their businesses. The vendor and the convention organizer may have an agreement that covers set up time, fees the vendor pays to the convention coordinator, and general rules like a booth must be manned at all times.
The vendor then collects money from each attendee who buys product from them. The convention doesn’t get involved in that relationship between the vendor and her customers.
Reasons to use a vendor hall model:
Here are the reasons why a homeschool organization might adopt a vendor hall model where the parents pay the teachers directly:
1. To avoid paying the teachers as employees. This avoids the cost and paperwork of running payroll. There are no W-2s to file and no quarterly payroll taxes to pay.
2. To avoid having Independent Contractors. These teachers paid by the parents are not independent contractors of the homeschool group, because the homeschool group does not pay them. This means the homeschool group doesn’t give the teachers a 1099-NEC at the end of the year. The teachers are business owners conducting their business (classes) that the homeschool program set up. Fro details on Independent Contractor status read this blog post on Is a homeschool co-op teacher an independent contractor if paid by the parents?
3. Keeps the homeschool group’s income low. This is advantageous for many reasons. Smaller revenues make the bookkeeping easier. Smaller revenues mean a nonprofit homeschool group qualifies for the simpler IRS information returns, Form 990-EZ or 990-N instead of the longer, more complex Form 990.
4. Easier on the treasurer who is usually a volunteer. If the parents pay the teachers directly the treasurer is not invoicing parents, receiving payments, depositing checks and not creating checks to the teachers. There is a lot less work to do!
Problems with parents paying teachers directly:
And here are the problems with the plan for parents to pay the teachers directly:
- The group’s leaders must stay of of the relationship. The homeschool group should not set the teachers’ fees, not touch their money, and not get involved in how or when parents pay the teachers. The homeschool group must be careful about negotiating prices with the teachers. The group should not give the appearance that the teachers are working for your homeschool group.
Nor can the homeschool group get involved in any complaints from parents. The homeschool leaders must stay out of the financial and inter-personal relationship between the vendor (oops, I meant teacher!) and her customer (meaning the family).
- The homeschool group must have NO control or direction over the teachers. That means the homeschool group cannot evaluate the teachers’ abilities in the classroom. The group cannot have the teacher sign a statement of faith (although you may be able to withhold an offer of a booth space-a classroom-to someone you fear will not uphold your statement of faith). The group should not train the teachers in any way.
- The teachers are all separate business owners. Do the teachers want to be business owners? Do they understand that that may mean registering as business in your state. Do they understand the tax implications and extra record keeping and reporting involved in running a business?
If your group meets in a church, library of other facility, does the church understand that several businesses are operating on their property? Have they notified their local property tax assessor about this change in building use? The property tax assessor may determine the church host must pay property tax since the building is used for business purpose.
- The “vendor hall” arrangement can affect the unity or sense of community of the program. Do the parents really want an impersonal transaction with the teachers? Or does your group see themselves as a community with a friendly, warm family-like vibe? Your relationship with the teachers affects the culture and the way your group feels to the families.
When the Vendor Hall model may work
Here is when the vendor hall model may work:
- When the students are older (junior and senior high) and can be dropped off and the teachers don’t mind running a business and the landlord/church has complied with property tax laws.
- When the parents want only classes for their students, not comradely and not a sense of community and the teachers don’t mind running a business and the landlord/church has complied with property tax laws..
- When the homeschool group leaders can stay out of the financial and personal relationship between the teacher and parents. Personally, I think that is nearly impossible.
- When your landlord is a church and has gotten approval from the local country tax assessor that 1. teachers operating their business will not cause the church to pay property tax or 2. the church will pay property tax and charge your homeschool group appropriate rent.
- The homeschool group is running a one-day homeschool fair or convention.
When the vendor hall model doesn’t work
The vendor hall model doesn’t work if your group needs to or wants to direct and control the teacher (even a little bit). This is very important especially when you are dealing with younger students and the teacher MUST be (somewhat) directed and controlled, because you are dealing with children! The children need to be safe and protected from harm, therefore your homeschool group has the responsibility to control and direct the adults teaching them. It is part of your fiduciary duty of care to manage and care for the program and its participants.
- Do you realize that if your group adopts a vendor hall model and a parent complains of inappropriate comments or behaviors by a teacher, you group CAN DO NOTHING?! You cannot fire this teacher because he or she doesn’t work for your group; they work for the parents. Your group is just a landlord or vendor hall coordinator.
- Do you realize when a parent complains about a teacher, that your group can do nothing? How do you think your parents will feel when you say to them, “You have a business relationship with that vendor-teacher. Discuss your complaint with them.” That will not go over well and you should be prepared for a lawsuit claiming negligence or lack of management.
Additionally, the vendor hall model doesn’t work well if the parents complain about paying several teachers monthly for all their children’s classes. They may pressure your group to collect one fee from the families (like colleges or private schools do) and they pay the teachers. But when your organization collects the money, you have entered into an Independent Contractor or employee arrangement with the teachers. That may be exactly what you were trying to avoid!
Conclusion: Vendor Hall Model for homeschool groups
In conclusion, I see many problems with the vendor hall model as a way to operate a homeschool program.
I think your best choices are:
Run an all volunteer program. A “pure” co-op where everyone volunteers and cooperatively teaches each other’s children. No one gets paid. My book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out will help!
Pay teachers as employees of the homeschool program. My book Paying Workers in a Homeschool Organization will be very helpful.
Carol Topp, CPA
Helping Homeschool Leaders