I state pretty clearly in my book Paying Workers in a Homeschool Organization (3rd edition) that teachers in a homeschool program should be treated as employees not Independent Contractors.
I’ve gotten some push back on my opinion. I understand why. No one likes the expense and paperwork involved in employees, especially when they are hiring part-time and seasonal employees.
But my goal is to keep homeschool organizations and their leaders out of trouble with the IRS and state governments. We don’t need a target on our backs! So I’m going to stick to my opinion because I think it’s correct and best protects homeschool leaders.
So let me explain why I have the opinion I do:
The IRS guidelines on worker classification are where I start. The IRS has the old 20-factor test and the newer 3 factor common law rules. I wrote about both of these guidelines extensively in Paying Workers.
But, I base my opinion on more than the IRS guidelines. I base it on hours of reading IRS rulings and tax court cases and my understanding of how homeschool programs operate.
I also base my opinion on this statement given by Bertrand M Harding, an attorney who specializes in nonprofit law. In his book The Tax Law of Colleges and Universities (Third Edition, Wiley, 2008) he writes,
“In at least one audit, the IRS agents asserted that, because instruction is such a basic and fundamental component of a college or university*, individuals who are hired to provide instruction should always be treated as employees because the school is so interested and involved in what they do that it will always exercise significant direction and control over their activities.” (emphasis added)
* The IRS was specifically addressing instructors at colleges and universities, but I believe their conclusion applies to public schools, private schools, and homeschool programs as well.
Some homeschool leaders differ with my opinion. I believe they are putting themselves at risk and I caution them about IRS penalties, etc. The Landry Academy IRS problems was a wake up call of how bad it can get. Although I don’t know the particular details on the financial penalties faced by Landry Academy, it was significant enough that the business declared bankruptcy.
I released a podcast on creative ways that homeschool co-ops can hire teachers without paying them as employees. Creative Ways to Run Your Co-op Without Employees
I hope that helps,
Carol Topp, CPA