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Setting up a learning pod for fall child care needs may have tax requirements

How they differ from microschools and what families need to know before hiring a care worker

Setting up a learning pod for fall child care needs may have tax requirements

COVID-19 continues to challenge parents on ways to fulfill their child care needs. With day care closures and fall school openings in question, some parents are considering private, shared care solutions with a small group of families to fill the gap. Known as remote learning pods, pandemic pods or microschools, these options have been relatively uncommon over the years, so many families are wondering how to set them up correctly. The good news is that we’re on top of the tax, payroll and compliance requirements and can help answer a lot of the questions you may have.

What are learning pods and pandemic pods?

In simplistic terms, these setups are similar to a nanny share in that a group of families with similar care needs come together to hire a trained caregiver. Where there is some uniqueness now is that the person being hired in a learning pod has the skill set you’d expect from a day care or child learning center worker. This is a little different from hiring a nanny because more of the focus is on education for young children. 

In fact, someone hired for a learning pod may be familiar with the common curriculum that your local day cares adhere to and will work that into the daily schedule you and the other families in the group come up with. Care and instruction can be provided in just one family’s home, or it can rotate, depending on the agreement the families come up with.

What if my kids are older and I’m looking for group teaching and instruction?

Many parents are referring to this setup as a microschool, but the idea is similar to a learning pod because they’re looking for a way to have a trained educator come to their home to teach a group of children. The difference with this setup is that the instructor is generally a teacher or tutor and provides their own curriculum that most likely mirrors what is taught at your child’s school. Parents don’t have nearly as much input on how learning and instruction is handled, which is why many of these instructors will charge a tuition rate like you’d see at a private school or day care.

How do I know if the caregiver or instructor hired for group care or teaching is my employee?

Like other caregiving scenarios, this is dependent on who is in control of the details of the working relationship. If the families in a learning pod or care share come together to agree on a set of tasks they want the caregiver to perform, and are dictating the hours the caregiver works and the days in which they work, the caregiver will most likely be an employee of each family, according to the IRS. This is true for both caregivers working full time with younger children, as well as someone providing part-time group tutoring to school-aged kids.

How can I tell if the group learning instructor I want to hire is self-employed?

Usually someone that is an independent contractor has gone through the process of setting up a business. You and the other parents typically will have to work around their availability, and they will provide the curriculum and daily schedule the kids will follow without much additional input. If the person has to miss a day of instruction, they will provide a suitable substitute. All families in your learning group will pay the person the rate they request and they will take care of providing everything the children need for care and learning.

Read more about the differences between employees and self-employed independent contractors.

What if I still can’t figure out if the person is my employee or an independent contractor?

If the person your group is hiring is in a gray area somewhere between both of these scenarios, the conservative approach would be to treat them as your employee. The reason being is because independent contractors should only receive payment for the job they perform, whereas employees often receive other benefits like paid time off and sick days.

If you’re providing these additional benefits, but treating the person as an independent contractor, there is potential risk if the caregiver or instructor files a wage dispute. When the state reviews the claim, they will wonder why benefits that are meant for employees were given to someone not classified as such. However, treating the person as an employee from the start doesn’t carry additional risk to you or the other families involved.

How do I manage taxes and payroll for a group caregiver that is considered my employee?

Assuming the caregiver meets the definition of a household employee, each family will evenly split the cost of hiring them. For example, if there are four families in your remote learning pod and you agree to pay the caregiver a total of $2,000 per week, each family would be responsible for $500 in gross wages and would need to withhold the appropriate taxes from this amount each week. Each family will also need to register as a household employer with the IRS and the state so they can file tax returns throughout the year and send in the taxes withheld from the caregiver and the taxes owed as a household employer.

Can HomePay help me with tax and payroll requirements of my learning pod?

Yes, we are equipped to manage all the federal and state tax and payroll requirements on your behalf. And by utilizing our service to pay your caregiver legally, you’ll be able to qualify for tax breaks to reduce the cost of hiring them. In fact, many families in a nanny share or learning pod will save more money in tax breaks than they will owe in household employment taxes. Just reach out to us and we’ll be happy to crunch the numbers for you to give you a detailed budget.

At the end of the day, we’re all trying our hardest to do what’s best for our children. If a group care situation is the most efficient, cost-effective way for you to have quality education for your kids while achieving an appropriate amount of work-life balance, we’d love to work with you to take the administrative tasks of managing a caregiver off your plate.

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