Search Results for: fundraiser

Scrips fundraisers for homeschool groups

Carol,
Our homeschool coop’s sports team decided to do a fundraiser using Scrips. The group is going to make each individual player buy their uniform instead of renting it from the team. So last August, the co-op started individual family accounts using money made from Scrips to be able to be applied toward buying individual uniforms.
According to some of the information I just read on your website (http://homeschoolcpa.com/do-not-use-individual-fund-raising-accounts/), I am concerned that this violates the rules for 501 c(7) non-profit social groups.
Am I understanding it correctly that allowing individual athletes to fund raise using Scrips to offset individual uniform cost is not allowed for 501 c(7) non-profits? Is this truly is an improper use of fundraising proceeds?
Thank you so much,
Elizabeth

Elizabeth,

You are correct that usually individual fundraising accounts are prohibited for 501c tax exempt organizations as I wrote about here and  here.

But Scrip is an exception to the “No individual fundraiser accounts” rule.

Great Lakes Scrip requested a private letter ruling from the IRS in 2009 stating that their program does not create income to the parent or inurement because they are rebates and not payment for services. BTW, these IRS private letter rulings cost thousands of dollars.

The IRS letter is 9 pages long and probably more than you care to read. Fortunately, Great Lakes Scrip provides a a nice, plain-English summary of the tax implications from using their scrip program.

“we want to reassure you that crediting your members’ scrip rebates toward their tuition or other fees has been reviewed and approved by the IRS, if you have structured your program correctly.” -Great Lakes Scrip
Take a little time to read the document from Great Lakes Scrip to be sure you are running your Scrips program correctly.

 

And one other word of warning come from Blue Avocado (a great source of information on running a nonprofit organization):
Regular scrip often results in a nonprofit handling a good deal more money than it ever has previously. For example, an all-volunteer group may be used to handling hundreds of dollars, but with scrip they may be handling tens of thousands of dollars in a short period of time. Doing so requires conscientious volunteers who have strong ability to manage funds carefully, promptly, and ethically.

Carol Topp, CPA

Helping homeschool leaders with legal and tax compliance

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What Homeschool Leaders Don’t Know About Fundraisers

What Homeschool Leaders Don’t Know About Fundraisers

Carol Topp, CPA, the HomeschoolCPA will share tips on important issues that homeschool leaders may not know about. This episode will focus on helping homeschool leaders know the tax rules about fundraisers.

Listen to the podcast

 

MONEY MANAGEMENT FOR HOMESCHOOL ORGANIZATIONS:  A GUIDE FOR TREASURERS 

  • Does your homeschool group manage their money well?
  • Do you have a budget and know where the money is spent?
  • Do you know how to prevent fraud?

This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.

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Homeschool groups and huge fundraisers can be a bad thing!

Hey Carol –

I have been perusing your site as we are getting ready to start a new homeschool group (breaking off a larger group) in our area. Based on the info I have read, I feel that we identify the most as a 501c7 social group.

We will be offering clubs, fellowship, and field trips as our primary purpose. As a larger homeschool group, we have sold Discount Cards with local businesses/restaurants giving certain discounts to patrons. We sold them for $5 each. This has been a huge fundraiser for the bigger group. One box of cards is $5,000 (not all profit as there is expense from the printing).

My question is if as a new group we could sell these to help with our expenses and if the UBI would be taxable? We definitely want to do things correctly. The sellers would be the members of the group and done voluntarily.

I appreciate any help you can provide. Thanks!

Joyell

Joyell,
Your organization avoids the UBIT tax because the fundraiser is conducted substantially (or in your case, completely) by volunteers.

But you need to be careful that at least 65% of your total income comes from membership dues. Therefore, a maximum of 35% your income can come from fundraisers. Note that this is income, not the net proceeds of your fundraiser.

Something like this:

Your group’s total income = $10,000

Membership dues (this can include field trip income) must be $6,5000 or more (at least 65% of total income)
Fundraiser income cannot be more than $3,500 (max of 35% of total income)

One of the problems with this type of fundraiser is that it brings in so much income (and of course has substantial expenses as well), it can that it can jeopardize your 501(c)(7) tax exempt status because the fundraiser income exceeds 35% of total income.

This may mean that you are no longer tax exempt and will owe taxes on your surplus each year.

IOW, the IRS requires 501(c)(7) social clubs organizations to get most of their funds from members and not from selling products or other fundraisers.

I hope that helps.

Carol Topp CPA

Will fundraisers cause a homeschool support group to pay taxes?

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I looked at the description of the 501c(7) Social Club status, and also reviewed your comparison chart between c3 and c7 status. I agree that our homeschool group most closely fit the 501(c)(7) Social Club status.

However, I was wondering if our periodic fundraisers would cause us to be taxed – your chart says on income from other sources.  We hold the fundraisers when our funds from membership are too low to pay the rent and other costs.
Thank you,
Lisa R

 

Lisa,

I’m glad you’ve figured out the differences between 501c3 charity and 501c7 Social club status. It’s important to figure out where your group fits.

You asked if periodic fundraisers would cause you to be taxed. It could be a problem, but not likely.

In general, fundraisers are considered “unrelated income” and nonprofits must pay tax on unrelated income (called Unrelated Business Income Tax, or UBIT).

Fortunately, the IRS offers several ways to avoid the UBIT tax. The exceptions include:

1. If the fundraiser was substantially conducted by volunteers (if no one was paid to run the fundraiser, then the proceeds are not taxed)

2. The fundraiser proceeds under $1,000 is not taxed.

The IRS has more exceptions to UBIT, but one or both of these exceptions to paying unrelated business income tax probably apply to your group.

Additionally, the IRS requires 501c7 Social Clubs to have most of their income come from membership fees (65% or more). You probably saw that on the chart comparing 501c3 to a 501c7 Social Club.

So make sure that your fundraisers stay under 35% of your total income. You said they are periodic and sound as if they are secondary to your membership fees (“We hold the fundraisers when our funds from membership are too low to pay the rent and other costs”).

I hope that helps.

Carol Topp, CPA

Ideas of easy fundraisers for homeschool groups

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Your homeschool organization probably looks for extra ways to bring in money. Carol Topp, the Homeschool CPA, shares ideas for easy fundraising in this episode of the Dollars And Sense Show podcast.

Listen to the podcast here

Easy fundraisers show notes:

Coupon and reward programs
Box Tops. Need 501c3 status
Shopping reward like Kroger Plus program
E Scrip

Food as a fundraiser
Pizza sales, bake sales to members
Candy, popcorn sales to public could impose a reporting to you state’s AG office
Restaurant (Chik-Fil-A) give a percent of proceeds from one night to your organization
Dinners as fundraisers

Donations
Via email, website, crowd funding, etc
Read-a-thon or walk-a-thon
Car washes and bake sales

Sell products
Ideas at TopSchoolFundraisers.com
Used curriculum sale. Charge an entrance fee, or a table fee to the sellers (or both!)

Reporting the Fundraiser income:
The IRS considers fundraisers to be unrelated to your nonprofit purpose and therefore, subject to taxation. Exceptions to the Unrelated Business Income tax:

  • Under $1,000 income from fundraisers in a year
  • All volunteer labor (no hired help to run the fundraiser)
  • Not regularly carried on
  • Selling donated items

State may require reporting to their attorney General if you sell to the public or solicit donations from the public. Usual exceptions are: only sales to members, a dollar threshold ($25,000 is common), all volunteer labor, but these vary by state.

Warning: No Individual fundraising accounts!
See http://homeschoolcpa.com/scouts-dont-allow-individual-fundraising-account-and-neither-should-you/

More information:
Money Mgmt HS OrgCover

Money Management in a Homeschool Organization book

Blog posts on fundraising: http://homeschoolcpa.com/tag/fund-raising/

Article “Easy Fundraisers for Homeschool Groups” at http://homeschoolcpa.com/leader-tools/articles/

 

If you enjoyed this podcast, please leave a review on iTunes. (click on View in iTunes to leave a review)

How to leave a review on iTunes

Thank you!

Carol Topp, CPA

Individual fundraisers and homeschool groups

Michelle in CO asked a question about fund raisers in a homeschool group:

Hi Carol,
We have had fund raisers in the past (butterbraids, a frozen pastry) and have made approx. $1,500 doing that fund raiser. We had a cooking class that prepared hot lunches and the co-op made money on those. We will have less than $100 left in the check book. We have a Fed ID #. What do we do? What about next year? Is fund raising not a good idea for us as you say in your website? We thought about charging more for membership (we charge $35/ yr now) and if people wanted to do individual fund raisers that would be up to each family. What do you think? Thank you so much for your help to the homeschool community and for whatever answers you can give us.
Sincerely,
Michelle P


Dear Michelle,

Did I say fund raising is not a good idea on my website? I didn’t mean to. Hopefully I just warned groups that fund raising can be a lot of work. And if you sell products to the public (outside your own membership) you may need to report your “solicitation” to your state. I’m writing an article now on fund raising and I do say this:

Your state may have reporting requirements if you are representing yourself to the public as a nonprofit organization. In my home state of Ohio, we have to file a Charity Registration form if we do fund raising to the public. One year we sold candles door to door and had to file a seven-page financial report with Ohio’s Attorney General Office. That report was such a nuisance (and the fund raiser was so much work) that we no longer do sales to the public. Investigate what your state requires from groups doing fund raisers. This website has nonprofit reporting requirements by state: http://www.hurwitasociates.com/.

In general I encourage groups to get most of their income from membership fees and not depend too much on fund raising. Fund raising can be very successful or turn out very poorly. It is also a lot of work with sometimes only a few people doing all the work.

I’m not sure what you mean by “individual fund raisers.” I do know that it is not proper to “award” a family for raising more money than another family, nor is it proper to set up individual accounts. It’s not right because it is not in keeping with the nonprofit motive or with the idea of a group benefit. In short, individuals are not supposed to benefit; the group is supposed to benefit.

Thank you for your kind words. I hope my website was helpful. I wish you success in Colorado as you serve homeschooling families!

Carol Topp, CPA

Homeschool leaders summer reading: Money Management in a Homeschool Organization

This summer I’m encouraging homeschool leaders to take time to become a better leader by reading through my books. This week I’m featuring my book,

When I originally published this book in 2008, it was a short 40 page ebook and had a horrible cover.  I was still learning and self-publishing was brand new!
MoneyMgmtCover
An update was badly needed and I tackled that project in 2014. The book ballooned to 131 pages and I subtitled it “A Guide for Treasurers.” I feel like I poured my CPA brain into this book.
Cover Money Mgmt HS Org
 Topics covered in this book include:
Chapter 1: Your Treasurer is a Gem!
Chapter 2: Checking Accounts Done Right
Chapter 3: Super Simple Bookkeeping Basics
Chapter 4: Show Us Your Books! Regular Reporting on Financial Status
Chapter 5: Establish a Budget: You’ll Thank Me Later
Chapter 6: Get What’s Coming to You: Collecting Fees
Chapter 7: Do I Have to Report This? Reimbursement Policies and Avoiding Taxes
Chapter 8: Using Software to Stay Sane
Chapter 9: Fraud: It Couldn’t Happen to Us
Chapter 10: Need More Money? Easy Fundraisers for Homeschool Organizations
Chapter 11: Risky Business: Insurance for Homeschool Groups
Chapter 12: Paying Workers: Hiring Employees and Independent Contractors
Chapter 13: Homeschool For Profit: Running a Homeschool Group as a Business

Here’s a special for the summer. Buy Money Management in a Homeschool Organization for 25% off. Get the paperback version for $7.50 (usual price $9.95). The ebook price is only $3.99.


Order Money Management in a Homeschool Organization paperback
Order Money Management in a Homeschool Organization ebook in Kindle or pdf

 

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My podcast The Dollars and Sense Show is on hiatus.

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My podcast  The Dollars and Sense Show is on hiatus.

Basically, I got too busy helping homeschool organizations, caring for family (including a 25 year old daughter with a broken leg!) and recovering from 3 surgeries in the past 12 months. Something had to go, so it was new podcast episodes.

But, hey, the previous podcasts episodes are all still available.

Podcasts never die, they just go on a break! 🙂

The podcast is part of the Ultimate Homeschool Radio Network where you will find over a dozen podcasts for homeschoolers by homeschoolers!

 

Recent shows of interest to homeschool leaders:

Episode #5   Ever thought about starting a homeschool organization? Starting a nonprofit homeschool group.

Starting a nonprofit homeschool group correctly
Starting a nonprofit homeschool group correctly
Starting a nonprofit homeschool group correctly

Episode #6  What is tax exemption and how do I get it for my homeschool organization?

Episode #17  Paying workers in a homeschool organization Part 1 Volunteers, employees and independent contractors

Episode #18 Paying workers in a homeschool organization Part 2 Forms to file with the IRS

Episode #30 Easy fundraisers for homeschool groups

Episode #36 Required IRS reports for homeschool groups

Episode #37 Has your homeschool group lost its tax exempt status?

Episode #41 Who’s afraid of the big, bad IRS?

Episode #42 How the IRS sees homeschool co-ops.

Episode #47 Tax exempt status for homeschool support groups

Episode #56  Homeschool Leadership is Like Marriage Part 1

Episode #57 Homeschool Leadership is Like Marriage Part 2

Will a nonprofit owe taxes on income from selling ads?

GirlThrowsMoney
We considering including advertising in our conference brochure. Can we consider this conference (exhibitor) income? Or is it UBI (Unrelated Business Income)?
We are also considering placing advertising in our magazine (and our website). Is this UBI? And how do we track it? And how do we report it? And what percent taxes would we pay on it?
Dorothy in OR
Dear Dorothy,
Advertising revenue is definitely Unrelated Business Income (UBIT) in the eyes of the IRS, because selling ads is not related to your tax exempt purpose (education), but you can avoid paying taxes on the unrelated business income in several ways.

The IRS offers several exceptions to UBI Tax (UBIT):

  1.     A $1,000 threshold allows that the first $1,000 in income from an unrelated business will not be taxed.
  2.     If the fundraiser (or unrelated business) is run substantially by volunteer efforts (i.e., no paid staff) then the proceeds are not taxed.
  3.     If the fundraiser is not regularly carried on, such as a once-a-year spaghetti supper, then the proceeds are not subject to UBIT.
  4.     If you are selling donated items, like in a garage sale, the income raised is not taxed.

I think #1 or #2 will apply to your group, so can get income from advertising without worrying about paying tax on it.

It’s a good idea to create a line item in your record keeping labeled “Advertising Income” so it’s clearly differentiated from other income.

Carol Topp, CPA

Tax Exempt Status for Homeschool Support Groups (podcast)

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Carol Topp, the Homeschool CPA, explains tax exempt status for homeschool support groups in her latest podcast episode.

She discusses what she learned about tax exemption from a recent webinar conducted by the IRS including:

  • Qualifications to receive automatic tax exemption from the IRS
  • In religious discrimination allowed or not?
  • Mandatory annual reporting to the IRS for support groups

Carol also discusses the advantages of forming as a nonprofit corporation.

Listen here

 

IRS and Your Homeschool Org coverCover Money Mgmt HS Org

Carol’s book, The IRS and Your Homeschool Organization, discusses the advantages of tax exempt status for homeschool organizations.

Carol also mentioned her book, Money Management in a Homeschool Organization.

 

Carol’s podcast, the Dollars and Sense Show, airs twice a month at DollarsAndSenseShow.com. If you’re a homeschool leader you might find these other podcasts helpful:

Episode #6  What is tax exemption and how do I get it for my homeschool organization?
Episode #30 Easy fundraisers for homeschool groups
Episode #36 Required IRS reports for homeschool groups
Episode #37 Has your homeschool group lost its tax exempt status?
Episode #41 Who’s afraid of the big, bad IRS?
Episode #42 How the IRS sees homeschool co-ops.