Are fund raisers harming your chances for tax exempt status?
November 22, 2010
Many homeschool organizations depend on fund raisers to help run their homeschool co-ops and support groups. These fund raisers could actually harm a group’s chances of obtaining tax exempt status.
True Story:
Julie is treasurer of a homeschool co-op in OK that desires to file for 501c3 tax exempt status with the IRS. I examined her financial statements and saw that the group depended heavily on profit from fund raisers including candy, food and flower sales. These fund raisers required Julie to collect over $12,00o a year in sales. The co-op made a profit of nearly $4,000 every year from their fund raisers.
“It’s a blessing to the co-op, because many of our families cannot afford even the small co-op fees we charge. And friends and neighbors beg us to keep selling our products, especially the locally made food.”
The profit from the fundraisers was actually more than the amount collected in co-op dues.
Unfortunately, with most of the co-op’s income coming from fundraisers and not co-op fees, the IRS may not grant Julie’s co-op 501c3 tax exempt status.
The IRS requires a significant portion of your income come from public support (i.e., the dues from your co-op families) and not from an “unrelated businesses” (i.e. selling products in a fund raiser). The IRS defines “significant” as having more than 1/3 of your income come from public support.
Fortunately for Julie’s group, the IRS has several exceptions. One of them worked for Julie’s group. Her fund raising efforts were all done by volunteers and so the IRS considers that fund raiser as part of the group’s support and they meet the 1/3 test mentioned above.
The IRS rules and exceptions get a bit complicated and both the homeschool leader, Julie, and I did our research. We will be very careful and thorough when explaining the fund raising programs to the IRS when Julie’s co-op files for tax exempt status with the IRS.
If your group has concerns about their fund raising practices, these related blog posts might help:
The IRS’s Word on Fundraising Do’s and Don’ts
What does the IRS mean by not allowing “private benefit” in a fund raiser?
Also, my ebook, Question and Answers for Homeschool Leaders addresses fundraisers in detail.
Read more including a sample chapter here
Order a copy (in pdf format) for immediate dowload for $8.00 here.
…working to keep you on the right side with the IRS!
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Finally, attend my free webinar on Fund Raising in a Homeschool Group on Tuesday, November 30 at 8:00 pm EST, 7:00 pm CT. You can listen in on-line and participate in the chat room or phone in and attend the webinar that way. For details on the login in information, phone number to call and workshop handout, click here.
Feel free to tell other homeschool leaders in your area about my webinar. The more, the merrier!
There is no charge for the webinar, except long distance phone charges if you call in .
Carol Topp, CPA
Webinar: Fund Raisers for Homeschool Groups
November 16, 2010
Fund Raisers for Homeschool Groups webinar
We discussed:
- Ideas: Easy fund raisers for your homeschool group
- Pitfalls to avoid
- The IRS and Fund Raising: Avoiding stuff that can get you in trouble!
How to listen if you missed the live session:
http://www.talkshoe.com/tc/73712
Grab This Handout
This handout references some links and important information about fund raising pitfalls to avoid.
Carol Topp, CPA
I’ve been nominated! Please vote for this blog
November 9, 2010
HomeschoolCPA blog has been nominated for this year’s Homeschool Blog Awards!
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The Homeschool Post is a community of homeschooling parents and students and once a year they hold a contest to recognize and encourage blogs that are run by homeschoolers. I was thrilled to learn that my blog here at HomeschoolCPA.com has been nominated under the category of Best Curriculum or Business Blog
If my blog has helped you, I’d be honored if you would vote for HomeschoolCPA!
It’s easy. Here’s what you do:
Click over to this page: http://hsbapost.com/2010/11/07/let-the-voting-begin-2/
Scroll down to #15. Best Curriculum or Business Blog
You then click on the circle next to HomeschoolCPA, hit the submit at the bottom of the page, and you’ve voted!
Voting ends at midnight CST on November 18th.
Thank you so much!
Carol Topp, CPA