I am confused by a few statements in your book Paying Workers in a Homeschool Organization. You say that a volunteer who receives tuition discounts and gift cards would have to report the income for tax purposes, but she would not receive a W-2. However, you state that a homeschool organization should keep track of the total amount of compensation for volunteers, “including reduced tuition or fee waivers,” and would need to give them a W-2 or 1099-NEC form to report the taxable income.
Does the organization need to issue a W-2 or not?
Is there a minimum amount of compensation at which the W-2 must be issued? And, if it must be issued, why not just write a paycheck to the volunteer?
Well, it’s tricky isn’t it?
A volunteer doesn’t have an employment agreement with the homeschool group. That’s why she won’t get a W-2. But a volunteer who receives more than insignificant compensation has compensation that should be reported on her tax return as taxable income. Perhaps it would be recorded as Other income or as Business Income on Schedule C of her Form 1040.
The homeschool organization needs to give W-2s to people with whom they have an employment agreement and then must add to that W-2 any taxable compensation that was in the form of tuition discounts, gift cards, etc.
Similarly, the organization needs to give 1099-NEC to people with whom they have an Independent Contractor agreement and add to that 1099-NEC any taxable compensation that was in the form of tuition discounts.
You asked, “Is there a minimum amount of compensation at which the W-2 must be issued?”
No. I’ve seen W-2s for less than $20 when a teenager worked only a few hours and quit.
And, if it (W-2) must be issued, why not just write a paycheck to the volunteer?
Because volunteers don’t get paid.
And a hiring an employee involves more than just writing a check and giving them a W-2. It involves FICA and Medicare withholding, quarterly statements to the IRS and state governments, workers comp, unemployment insurance, etc.
What most homeschool groups do
In general, most homeschool organizations avoid the confusion by not giving volunteers significant, taxable benefits like large tuition discounts. They keep their volunteer appreciation insignificant and not taxable (like priority registration, small discounts, appreciation dinner or small tokens of appreciation like coffee mugs). Or they hire employees and then the workers are no longer volunteers.
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
Helping Homeschool Leaders