A homeschool co-op treasurer asks about the tax filings for paid teachers:
I am the treasurer for a new co-op we have setup this summer, and will be starting our class days in the beginning of September. I am looking to get some advice from you on how we need to define our mentors (teachers), and if we need to give them W-2’s, and if we need to with-hold taxes, etc.
We will have about 12 mentors, each teaching a class of 8-9 kids on Fridays. We follow a curriculum that the parents buy on their own. We try to keep the cost very low, so the mentors, which are all mom’s of kids in the program get paid $800 for the year.
We have already been setup as a South Dakota non-profit corporation, and would like to work towards a 501c3 in the future, but not this year. Our main issue right now is we need to move forward with setting up a checking account, which requires an EIN, and to get that we need to know if we have employees. Also, I want to determine how I need to be paying them, as far as tax with-holdings, etc.
Doug M, SD
Congratulations on your new co-op. It sounds as if you are off to an great start! You should be very proud of all that you have accomplished.
As you described the co-op’s relationship with the paid mentors, they should all be classified as employees. Your co-op exercises quite a bit of control by telling them what curriculum to use, so they are not independent contractors.
IRS Publication 15 Employers Tax Guide has a nice checklist of forms and dates that you’ll need to file:
You should collect a Form W-4 from each employee for their information and federal tax withholding To make your job simpler you can tell your employees that the co-op will not withhold federal or state income tax since their wages are relatively small. The W-4 is kept by you and not mailed into the IRS.
The co-op will be responsible for paying federal employer taxes (Social Security and Medicare) and filing quarterly statements with the IRS (called a Form 941). See IRS Publication 15
At the end of the year you will issue a W-2 to each employee and mail copies of the W-2 and W-3 to the Social Security Administration. See Pub 15 (above) for details. I go to an office supply store in January for the forms and usually a software program is included.
South Dakota may have unemployment tax requirements and workers compensation payments. Contact your state’s department of taxation or employment for details. I’m no expert on SD taxes, but here is a place to start: SD New Hire Reporting
Try not to be overwhelmed by all this. A lot of it is start up paperwork. You may want to see if there is a local CPA who can help you or at least check over the forms the first time you complete them. You could also consider using software such as Quickbooks and their Payroll feature (an additional add-on).
Carol Topp, CPA