Sorry--I misunderstood what you said in your first post--I thought you meant you paid a fee every month to the school, which was the same as what the school paid her. But as I re-read it, I think you're saying you pay her the same set fee every month of the school year, right?
If the person does end up needing to be treated as an employee (as per the 20 factors test info JHB gave you), you can get out of being an employer if you can talk the school into being her employer, and, like I thought was happening, you just make a donation to fund her salary. Keep in mind, too, that if she is an employee, you may have other issues, such as workers comp. In some states, you only need one employee to be required to carry workers comp insurance.
The PTO pays the drama person every month and the school doesn't pay her, we do. But the other problem is that our school is for-profit and publicly trades. This area is very uncharted so we are trying to make sure everything we do is appropriate.
Why is the school paying the drama teacher and then passing on the bill to you? Is the school treating the teacher as an employee and deducting for taxes and any other benefits? That would be a big clue for you right there. If that's what is going on, you don't have to record the teacher as an employee as well, nor do you need to provide a 1099. All the tax issues have been taken care of from that standpoint; the PTO is just making a donation to the school.
If she's met the test to not be an employee of the school, then it's highly unlikely that the PTO is going to have to treat her as an employee; just changing the organization that is paying her without changing responsibilities and duties in and of itself isn't going to change her status.
Unless the PTO is setting the curriculum and the drama teacher is only teaching drama for your students, I suspect it's highly unlikely that you're going to have to treat her as an employee.
Yes, but check the IRS rules. It used to be $400, but I think currently it's if you pay any one person more than $600, then you have to provide a 1099-MISC.
You probably need to talk to the IRS, lawyer, or tax attorney about this one. The general rule of thumb for an independent contract is:
you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result.
The person is an employee if:
performs services for you is your employee if you can control what will be done and how it will be done
There used to be what was called "The Twenty Factors Test" of key questions the IRS used to help analyze each situation. I think I heard they were trying to simply that to fewer questions, so I'm not sure of the status. But here's a link to those 20 questions - which should be a good starting point for you.
If it's not clear cut after you look at those issues, do some more exploring. Definitely consult a professional if you have doubts. Note -the principal may be able to consult the district's legal and HR staff without cost to you.
