How can a nonprofit board receive benefits (properly)?

A homeschool organization sent me their bylaws to look over. They had two conflicting statements about offering compensation or benefits to their board members, especially the officers (the officers of a nonprofit organization are President/Chair, VP, Secretary and Treasurer).

Article 4 Section 1 Board members shall receive no compensation (other than reasonable expenses) for their service on the Board.”

Article 5 Section 4 Officers of the Board are eligible for benefits such as discounts, retreats and/or priority registration as well as other meeting expenses deemed reasonable by majority vote.

So which is it? Are officers allowed compensation/benefits or not? Tuition discounts are taxable compensation according to the IRS (unless they are “insignificant“).

Also the benefits are approved by a “majority vote.” Majority of whom? The board? This organization has no voting members except the board. And a nonprofit board cannot vote themselves benefits because that is a conflict of interest and private benefit which is forbidden by the IRS (if excessive).

I understand the desire to thank hard-working board officers, but be careful that it doesn’t become taxable income or a conflict or interest or worse private inurement which is forbidden by the IRS for 501(c)(3) organizations.

Here’s what I recommend:
1. Change the wording of Article 5 Section 4 to read Officers of the Board are eligible for  benefits (such as insignificant discounts, training (retreats and conferences) and/or priority registration) deemed reasonable, but not significant enough to be taxable income, by majority vote of the non-officers of the board or recommended by an independent committee.

and then

2. Hold a board meeting where the officers leave the room and the remaining board members vote on what benefits the officers will receive that year. That means you need to have a large enough board to do this. And it needs to be done every year.

Or

appoint an independent committee (no one on the committee is related to any of the officers) to make a recommendation. The board votes to accept the committee’s recommendation (but without the officers allowed to vote since they will personally benefit).

These changes in their bylaws and having other board members vote for the officer benefits will keep the organization from having a #1) conflict of interest and #2) the appearance of private benefit. It also means the officers are being thanked for their service without receiving any taxable income.

 

If your organization needs help in understanding how to thank your board members (properly), read

or my new Homeschool Organization Board Manual. It’s a template for you to create your own board manuals as a place to store important papers and policies.

Carol Topp, CPA

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Homeschool Board Duties

 

Did you know the 4 main duties of homeschool board members? They are the duty of care, loyalty, management and compliance.

In this short podcast episode (12 minutes) Carol Topp, the Homeschool CPA, explains what those duties look like in practice. She offers tips and advice to help your board do a better job with their responsibilities in running your homeschool organization.

In the podcast Carol mentioned that you can heave a

Phone Consultation with Carol Topp, CPA

Phone Consultation: A pre-arranged phone call to discuss your questions. My most popular service for homeschool leaders. It’s like having your own homeschool expert CPA on the phone!

Cost: $75/hour to nonprofit organizations.

Q &A by Email:  I am willing to answer questions by email, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails.

Contact HomeschoolCPA, Carol Topp, CPA, to arrange a telephone consultation.

 

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Homeschool support group has problems with bank and IRS

Carol – I just got off with the IRS and I am EXTREMELY irritated and frustrated!!!!! Our homeschool group is a 501c7 social club; we have adopted by-laws. To open up a bank account, the bank wants documentation from the IRS giving proof that we are recognized as a nonprofit organization.

I spoke with two different people at the IRS and the last one was in the tax exempt dept. He and I did not communicate well. He said we had no paperwork in and that I needed documentation for our group. I explained that I had by-laws but he wanted to know if they were signed. I asked if that meant with a signature and he just kept saying the same thing without answering my question.  We kept going round and round with him asking me the same question. Just frustrating!!!

So what do we need to do to be able to get our checking account opened?

Joy

 

Joy,
I’m sorry you had such difficulty with that IRS employee.

The IRS Exempt Organization has lost many of its experienced employees to retirement and to other parts of the IRS managing the Affordable Care Act (Obamacare). And what we’re left with is robots like you talked to. They simply read from a script. I’ve heard several complaints.

Forget the IRS. Go back to the bank. Explain to them that you do not have IRS proof because you are a self-declared tax exempt 501c7 Social club. Bring your bylaws, a list of board members, and your EIN letter form the IRS. Common law states that a nonprofit is formed when you have a board and bylaws.

Proof from the IRS is not needed to establish a nonprofit checking account because the IRS grants tax-exempt status, not nonprofit status. There IS a difference.

Read this article: How to become a recognized Nonprofit

You may need to educate the bank teller. They are frequently misinformed.

Hand them this blog post: http://homeschoolcpa.com/banker-wants-irs-letter-t…

Tell him that 501c7 social clubs can self-declare tax exempt status and do not need a letter from the IRS to prove tax exempt (or nonprofit) status.

Read more about self declaring tax exempt status: Homeschool Groups as Social Clubs

Act informed and confident. You are eligible to open a nonprofit checking account and do not need “proof” from the IRS of self-declared tax exempt status.

Good luck!!

Carol Topp, CPA
Helping homeschool leaders

 

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We Changed Leaders: Who Do We Notify?

 

Have you changed leaders in your homeschool organization?

In this short podcast episode (12 minutes)  Carol Topp, the HomeschoolCPA, will  explain what government agencies you need to notify when you change your address or change leaders. She explains the forms and organizations you need to notify.

 

In the podcast, Carol mentioned a board manual temple for your homeschool group

Homeschool board  members should keep all their organization’s important papers in a safe and accessible place. Usually, a 3-ring binder works well.

Author and homeschool advisor, Carol Topp, CPA, has created a Homeschool Organization Board Manual. It is a template to create a board member binder. It has:

  • A list of important documents to keep in your binder
  • Section dividers so you can organize the important papers
  • Tools to help you run your meetings smoothly including
  • A sample agenda that you can use over and over again
  • A calendar of board meetings

 

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Homeschool co-op drop-off policies


Homeschool-life ,the popular website hosting service for homeschool groups, has a Leaders Forum. (If you’re a leader you can join the forum here) Recently a question about co-op drop off policies was asked.

Does anyone run a home school co-op that has a drop off policy?  

Do you have any tips that make it successful?

The forum members were full of advice.

Melissa said:
“In our group a parent may only drop off for an activity if they have made an arrangement ahead of time with another parent in the group be in charge of their child for that day/time/activity.  So if there is a injury, behavior issue or other need, it’s addressed by the parent who has volunteered to be assigned to this child. Our group is not huge (20 families) but this has worked out so far.”

BeckiJo wrote:
“We are primarily a drop-off co-op. Parents are not required to teach or assist in classes, but they are required to volunteer 6 times a year or pay a maintenance fee. Children under 10 are required to have a parent or other responsible adult present to help them move between classes and supervise the child during free time and lunch. We have made a few exceptions due to special circumstances. Some of those exceptions have worked out, others have been more difficult. We have not had any difficulty with our students 11 and older acting responsibly. We have volunteers that monitor lunch time which is our busiest time.

“We have actually found that we have a wonderful community of parents and students. The parents who stay with their younger students have built friendships and have been able to support and help each other. We have many parents of older students who stay for part or all of the day because of distance, enjoying the community, also working with their students during free time.

“We have just completed our co-op year, my first in leadership. One my blessings this year has been the opportunity to watch the sense of community build in our co-op, something that has been missing in the past.”

Sarah shared,
We do have a successful drop off program. It is approved on a case by case basis. It is usually older students. We have found it to be mutually beneficial because we charge a fee for this privilege. Our drop-off fee is $35 per student, per class.The money from these drop offs is then used towards events/programming that benefits everyone involved. We have had elementary students involved all the way up to high school but they were screened and would not have been allowed to continue if they had behavior issues.

Melissa wrote,
Our enrichment classes are all drop off except that we require one volunteer hour per week and one cleaning day per semester. Parents are welcome to stay but there’s not a specific spot for them to be. We have forms to fill out and code of conduct forms for parents and students. It’s all worked out for the 20+ years our group has been doing it.

Another leader shared,
We also have returned to a no drop-off policy. We did allow what we called independent students to attend for a while. They had to be high school aged.  The hope was that we could fill more seats in our high school classes. But the reality was we just needed to have more parents on site to work in classrooms as teachers and assistants. The kids were very well behaved and we wish we could still have an opportunity to have them in classes, but there needs to be a mutually beneficial relationship between co-op and families. I would never consider drop-offs for younger students. Too many obstacles and challenges for simple unpaid volunteers.

Melissa P. wrote,
Our co-op used to allow drop offs for children ages 13 and up. We stopped allowing it, because it diminished the sense of community among moms. There were also some behavior issues which would have been better able to be addressed with a parent on campus.

We make exceptions for emergency circumstances, and have a sign-out sheet, which requires another mom to be present with the children and responsible for them. A mother’s illness would be included in that. Mothers who have chronic illnesses are not, as we feel that we support a whole family, and a parent who is never in attendance is difficult to support.

Our decision was based on us wanting to diminish the feeling that we were a school, and remain true to our roots as a cooperative support group. It’s not always a popular choice for the parents, but we decided that we preferred our membership to be those who want community, not those who simply want classes.

As a consideration, your insurance may not cover you if parents are not on campus. In our state, if parents drop off, it creates a school/daycare situation, which has other licensing requirements.

Kimberly said,
As a rule, my co-op does not allow drop-offs. We do make exceptions, using a pre-authorized form, that gives us all the parental location, phone number info and the adult at the co-op who is responsible for the child. In the case of an emergency, there needs to be an acknowledged adult responsible for the child.

 

So as you see these are lots of ideas for drop-off students at your co-op. There does seem to be a consensus that a drop-off program should be for older students, not younger ones.

Carol Topp, CPA

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Giving Scholarships or Discounts in Your Homeschool Group

Does your homeschool group give discounts, scholarships or benevolent gifts?

What’s the difference and how should they be operated?

Homeschool CPA, Carol Topp, offers advice and tips on offering help for needy members in this short podcast episode (15minutes).

 

 

I mentioned my book

Money Management in a Homeschool Organization

  • 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.

 

Carol Topp, CPA

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Pins to help homeschool leaders

I love Pinterest! Do you?

I have a Pinterest page with 55 boards and over 2,000! Yikes. I shocked myself when I counted them all!

The board you’d probably be interested in as a homeschool leader is the

Helps for Homeschool Leaders board

There you will find links to my podcast episodes, my blog posts and my books.

Hop on over there and follow me so you can stay up on my HomeschoolCPA blog posts and podcasts.

And feel free to save, share or and repin any pins you find helpful. If you like it, chances are another homeschool leader will benefit too!

Carol Topp, CPA

HomeschoolCPA.com and Pinterest lover!

P.S. Check out my other boards to see what I do when I’m not helping homeschool leaders (I paint watercolor and crochet and travel a bit!)

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Paying Volunteers Q&A with Homeschool Leaders

 

Can you pay a volunteer?

This short podcast episode (15minutes) from Carol Topp, the HomeschoolCPA, is the last excerpt from the Homeschool Leaders Retreat held in Indiana.

Carol Topp discusses how to pay (or thank) a volunteer and paying teachers in a homeschool co-op without causing tax problems for your volunteers (or your church host).

 

I mentioned my book

Paying Workers in a Homeschool Organization

Are you paying workers in your homeschool organization?

  • Can a volunteer be paid?
  • Should a worker be treated as an employee or independent contractor?
  • Do you know the difference?

Homeschool leader and CPA, Carol Topp, has the answers to your questions in her book Paying Workers in a Homeschool Organization.

This 130 page book covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

 

Carol Topp, CPA

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Is there a difference between a 501c3 and an association?

Carol,
Is there a difference between a 501c3 and an association?
T.W.

T.W.,
501(c)(3) is a tax exempt status granted by the IRS to qualified nonprofit organizations (most of them are nonprofit corporations) whose purposes include charity, religious, and educational (and a few other purposes).

The word “association” does not have a specific legal definition. Associations are a gathering of people for a cause. Associations are typically nonprofit organizations. They can be unincorporated or be formed as nonprofit corporations.

Some associations may qualify for 501(c)(3) tax exempt status, some may not. For example I am a member of the Ohio Society of CPAs. It is a business association for CPAs in Ohio. It has tax exempt status as a 501(c)(6) business league, but not 501(c)(3) status.

If you’re confused by the words, nonprofit, association, 501(c)(3), this short video may help clear things up:

 

I hope that helps,

Carol Topp, CPA

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Tax Exempt Q&A with Homeschool Leaders

 

Have questions about tax exempt status for your homeschool group?

This short podcast episode (16 minutes) from Carol Topp, the HomeschoolCPA,  is an excerpt from the Indiana Homeschool Leaders Retreat. Carol Topp discusses tax exempt status and answers questions from homeschool leaders about self-declaring tax exempt status for your homeschool support group.

 

 

In the podcast I mentioned my book

The IRS and Your Homeschool Organization

Does your homeschool group need to pay taxes? Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?

I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

 

Carol Topp, CPA

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