More Money Myths Homeschool Moms Believe. Dollars and Sense Show #14

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In this episode of the Dollars and Sense Show host Carol Topp and her guest Susan Raber of AtHomeAndSchool.com discuss more money myths that homeschool moms believe.

Listen to the show here
From Episode #13 of the Dollars and Sense Show, Carol and Susan discussed three money myths:

Myth #1: Just a Little More Money is All I Need…

Myth # 2:  I Need …..

Myth # 3:  It was on sale; I saved a lot of money!

On today’s show, Carol And Susan discuss two more money myths.

Myth # 4: Homeschooling is Expensive:

A study of 220 families spend between $300 and $1,000 per family each year. Private schools cost from $3,000-$10,000 year.  That’s expensive!

Truth:  Homeschooling is time consuming.

“Opportunity cost” is the cost of passing up a choice when making a decision.

Money tip:  Make up a homeschool budget.  Include books, field trips, classes, magazine subscriptions.

 

Myth # 5: I’ll use it someday

Truth:  You don’t know what the future holds

Ask yourself:

  1. Am I going to use it now or in the near future? Beware of buying things with the reasoning, ‘I’m not sure when I’ll use it, but I’ll use it someday.’  Tell yourself, “If it’s that good, it will be there when I need it.  If not, something better will replace it”
  2. Where is it going to go?  Make sure you have a clearly designated space otherwise it increases your clutter.

 

We hope you’ve enjoyed these Five Money Myths and remember them as we enter the homeschool convention shopping season!

 

Tune in for the next Dollars and Sense show on April 24, 2014 when Carol will start a series on tips for teenagers or parents wanting to start a micro business.

 

Tax exemption for homeschool group switched by the IRS

Congrats501c3

The Learning Vine, a homeschool organization in North Aurora, IL,  just received 501(c)(3) status from the IRS.

This group had originally applied for tax exempt status as a 501(c)(7) Social Club on their own. The IRS held up their application for a year and then informed them that they should be filing for tax exempt status as a 501(c)(3) educational organization.

Confused? So were the leaders at The Learning Vine. That’s when they contacted HomeschoolCPA.com

I was happy to help this group become tax exempt and continue serving homeschoolers in IL!

Tax Exempt Status for Homeschool organizations

Do you know the difference between 501(c)(3) and 501(c)(7) status? Do you know what 501(c)(3) status could mean for your homeschool group?

This article may help: Homeschool Groups As Social Clubs

Resource for Homeschool Leaders

IRS and Your Homeschool Org cover My book The IRS and Your Homeschool Organization could help your group as well. This 120 page book explains the pros and cons of tax exempt status and how to apply.

Price: $9.95  Learn more here.

Money Myths Homeschool Moms Believe. Dollars and Sense Show #13

DollarsSenseShow#13

In this episode of the Dollars and Sense Show host Carol Topp and her guest Susan Raber of AtHomeAndSchool.com discuss money myths that homeschool moms believe.

Listen to the show here

Do any of you, like me, have curriculum sitting on your shelf, that, if you are honest with yourself, you will probably never use?

I want to share some experiences I’ve learned about money and homeschooling.  I call it the Five Money Myths that Homeschool Moms Believe

Myth #1:  Just a Little More Money Will Solve All My Problems

Truth: Problem is not lack of money, but lack of contentment

Contentment Robbers: mail order catalogs, magazines, malls, etc… For homeschoolers the list is similar:

  • homeschool catalogs,
  • homeschool curriculum fairs,
  • homeschooling web sites and forums,
  • homeschooling magazines
  • and even (gasp) other homeschoolers

I personally do not look at the Sunday sale ads.  I didn’t know I needed stuff until I saw the ads!  So I stopped looking. Maybe it’s the same with you.  What are your contentment robbers?

Here’s some advice:

  1. Only look at catalogs when you have a specific need
  2. Use a shopping list at curriculum fairs. If it’s not on the list, you don’t need it.

Myth # 2:  I Need …..

Truth:  Wants are different from needs

Do you think that you just have to have a certain item (whether you need it or not) just because another homeschooler has it?

Here are some tips:

  1. Don’t buy things sight unseen
  2. Don’t buy more than one year of a new text

Myth # 3:  It was on sale; I saved a lot of money!

Truth:  Money is not saved unless there is a deposit into the bank!

As yourself: Is the sale price a good value?

My daughter was looking at an audio book catalog with deeply discounted prices.  “How can they sell these audio books so cheaply?” she asked me. “The original price was $500 and they’ll sell it for $150.” Perhaps, it never sold at $500 and it’s only worth $150. Is the $150 a good value?

Tip: If you buy something on sale, put the difference in a savings account.  Use the savings for future homeschool needs.

 

Tune in for the next Dollars and Sense show on April 10, 2014 when Carol and Susan will discuss More Money Myths that Homeschool Moms Believe.

 

How come we never had to file anything with the IRS before?

Dear homeschool leader,

Did you just hear the shocking news that all nonprofit organizations have to start filing annual returns with the IRS?

You may be wondering, “What changed? We never had to file anything before!” And you’d be right.

For many years the IRS had a problem: nonprofit organizations were not giving them annual information returns (Form 990EZ or Form 990). The IRS let small organizations (under $25,000 per year was considered small) get by without doing any annual filings, but the IRS couldn’t tell if an organization failed to file an annual return because

  1. The organization had died or
  2. The organization had less than $25,000 in income and wasn’t required to file a return or
  3. The organization was large and just not filing a return with the IRS. IOW, they were not playing nice and the IRS didn’t like that!

The IRS found some nonprofits are not following the rules and (gasp!) complained to Congress.

Congress passes the Pension Protection Act in 2006.

Photo credit: kakisky from morguefile.com

So the IRS got Congress to pass the Pension Protection Act in 2006. It required two things from nonprofits:

1. All small organizations (revenues of less than $25,000 per year) had to start filing an electronic form to the IRS every year. What the IRS called the 990N or their “e-postcard.”

and

2. All tax-exempt organizations that didn’t file an information return for three consecutive years will automatically lose their tax-exempt status. I call it the “3 strikes and you’re out” rule.

 

So here’s the timeline:

2006: Pension Protection Act requires annual electronic notice from all small nonprofits.
2007, 2008, 2009 were the first years that the annual notification requirement was in place.
2010: The first automatic revocations take place. The “3 strikes, you’re out” rule.

Word about the new required annual filing has been slow to get out. After all the IRS doesn’t have a big marketing budget. They sent letters, created press releases and even created a YouTube video, but a lot of small nonprofits were still in the dark.

Slowly, a lot of small organizations learned that their tax exempt status had been revoked and they didn’t even know about it! I guess the IRS got an earful of complaints because they (finally) created a system where small nonprofits could get their tax exempt status reinstated.

IRS created a “streamlined” reinstatement process for nonprofits

The process is outlined in IRS Revenue Procedure 2014-11 that came out in January 2014. Yes, that’s 2014. Eight years after the whole reporting requirement was enacted by Congress. We never claimed the IRS was speedy, did we?

The IRS loves paper and so the Rev Proc 2014-11 requires nonprofits to send the IRS a lot of paper. They have to file the rather long Application for Tax Exemption (Form 1023 or 1024) and probably file their annual information returns (Form 990) way back to 2008.

I’m not quite sure what’s streamlined about this, but I guess to a turtle, a snail is speedy!

So that’s why you are wondering if the IRS has some sort of new reporting requirement. It’s not really new, it’s 8 years old, but maybe you’re just now hearing about it.

What to do now

  • Brush up on the Form 990N and start filing it now!
  • Search the IRS list of revoked organizations to see if your nonprofit is listed there.
  • Read Rev Proc 2014-11 if you like reading IRS jargon to see what paperwork you need to file with the IRS to get your tax exempt status reinstated.
  • Or better yet, arrange a phone call to talk over your situation with me, HomeschoolCPA, Carol Topp. I’m pretty good at understanding homeschool organizations and can help you know where you stand with the IRS and what to do next.

Thanks to Peter B. Nagel over at  http://www.cobar.org/index.cfm/ID/20108/subID/26452/CORP for providing the history of the IRS rules.

Carol Topp, CPA

 

 

 

Teens and taxes. Dollars and Sense Show #12

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In this episode of the Dollars and Sense Show host Carol Topp discusses taxes and teenagers.

Listen to the show here

Show Notes:

 A teenager files their own tax return!  Do NOT add your child’s income to your tax return.

You can still claim your teenager as your dependent. They check a box stating they are claimed as a dependent on your tax return.

Major taxes affecting teenagers: earned income, unearned income, and self-employment tax.

 Earned Income from a job or micro business (including babysitting). Federal income tax is owed if earned income is more than $6,100 (in 2013)

 Unearned Income: interest, dividends, capital gains on taxable accounts in the student’s name. Federal income tax is owed if unearned income is more than $1,000. Between $1,00 and $2,00 unearned income is taxed at child’s tax rate. More than $2,000 unearned income is taxed at parent’s rate  on Form 8615 (“Kiddie tax”)

Self-Employment Tax

Same as Social Security and Medicare for self-employed people. 15.3% of profit over $400. Unadjusted since 1954 (adjusted would be $6,250). Schedule SE attached to Form 1040. Reported on Line 56 under Other Taxes on back of Form 1040. (the “hidden” tax)

Example: $5,000 profit earned by single teenager. Income tax $0. SE tax $706!

If you’d like to see this changed, visit MicroBusinessForTeens.com/eliminate-tax-on-teen-entrepreneurs for a position paper you can share with your congressman.

 Exception to SE tax for teenage Household Employee: Students under age 18 working in or around an individual’s home is a household employee are not subject to SE tax. Report wages on Form 1040 Line 7 with “HSH” as note. Examples: babysitting, lawn care, house cleaner

 Teenagers scammed: Treated as independent contractor instead of employee.
Signs: Paycheck with no SS/Medicare withheld. Paid in cash. 1099MISC not W-2.
Action: Complain to employer. File complaint with IRS (Form SS-8) and Form 8919 to pay half SS/Medicare.

Resources

Teens and Taxes ebook by Carol Topp, CPA available at TeensandTaxes.com
Money and Taxes in a Micro Business by Carol Topp, CPA available at MicroBusinessForTeens.com
IRS Understanding Taxes website http://apps.irs.gov/app/UnderstandingTaxes

 

Tune in for the next Dollars and Sense show on March 27, 2014 when Carol will discuss 5 Money Myths that homeschool moms believe.

 

Money, Taxes and the Homeschool Family

My latest article “Money, Taxes and the Homeschool Family” is in this month’s edition of The Old Schoolhouse magazine.

Read the entire article here

The Old Schoolhouse magazine is  completely online and FREE.

You don’t even have to give your email to read it. How coo is that?

You might want to visit page 34 too!

Carol Topp, CPA

Homeschool co-ops are like marriage: know what you’re getting into!

GHC_Co-ops_SC

 

I’ll be speaking to homeschool leaders on the topic of homeschool co-ops at the Great Homeschool Convention in Greenville, SC on Thursday, March 20, 2014 at 5:00 pm.

Here’s a handout: Homeschool co-ops are like marriage.

I hope to meet some of you there!

Carol Topp, CPA

Video: Nonprofit status for homeschool groups

I created a short video explaining nonprofit status for homeschool groups.

I compare nonprofit status to being married!
See what you think:

 

If you have more questions about nonprofit status for your homeschool organization, start by reading these articles:

 

IRS and Your Homeschool Org cover

 

My book The IRS and Your Homeschool Organization is very helpful for homeschool groups considering tax exempt status.

 

Carol Topp, CPA

Video: Annual IRS fiings for homeschool organizations

A short video on annual IRS filings for homeschool organizations.

I explain the annual IRS information return, Form 990.
See what you think:

For more information on the Form 990, read this blog post

http://homeschoolcpa.com/irs-form-990n-faq/

 

Carol Topp, CPA

Any tax breaks for homeschoolers? Dollars and Sense Show #11

DollarsAndSenseShow11

In this episode of the Dollars and Sense Show host Carol Topp discusses tax breaks for homeschoolers.

Listen to the show here

Show Notes:

There is no federal tax credit or deduction for homeschool expenses

Some states do allow a deduction, usually on state income tax. Proposed in Ohio: Property tax deduction for homeschool expenses

Arizona, Illinois, Indiana, Iowa, Louisiana and Minnesota and all have some sort of tax break for individuals. The credit is available to any public or private school student, so it is not unique to homeschoolers.

Links:
This website has a comparison of state programs that offer a tax credits for educational expenses or for a donation to a scholarship fund. It was last updated in September 2011. http://www.house.leg.state.mn.us/hrd/pubs/educcred.pdf

Home School Legal Defense Association has an explanation of some states’ tax breaks or credits:http://www.hslda.org/docs/nche/000010/200504150.asp

Ann Zeise of A to Z Home’s Cool has a great, detailed and lengthy post of tax write-offs for homeschoolers:
http://a2zhomeschooling.com/laws/homeschool_laws_legalities/tax_writeoff_educational_writeoffs/

 Disadvantages of tax breaks for homeschool expenses:
We have an overly complex tax system already
Fear of government regulation, proof of homeschooling, etc.

 

Remember tax deductions and credits just reduce the tax you pay.

Your state government is not putting cash in your hand to purchase books. You must do that first.

Then you pay a little bit less in tax via a tax deduction.

 

Tax breaks for parents

  • Exemptions: $3,900 per person in 2013.
  • Child tax credit. $1,000 per child. Ends when child turns 17, not 18! Law says child “was under age 17 at the end of the year.”
  • Earned Income Credit
  • Child care deduction (if working for pay)
  • Educator Expense deduction (not allowed for homeschoolers because the teacher-parent is not employed by a school for 900 hours in a school year)
    • There is a bill in the US House of Representatives to allow home school parents to take this deduction. HR 1850 sponsored by Rep Tom Cole, R-OK.

Education credits/deduction

  • American Opportunity Credit (used to be called the Hope Credit) up to $2,500 per student. Tuition, books and equipment. First 4 years of undergraduate college.
  • Lifetime Learning Credit: up to $2,000 per tax return. Tuition, books and equipment. Undergrad, graduate and courses to acquire or improve job skills.
  • Tuition/fees deduction: Up to $4,000. Cannot claim tuition deduction and AOC/Lifetime for same student in same year.
  • Student loan interest deduction. $2,500 deduction.
  • Some states allow 529 deduction (Ohio)

College savings incentive

  • 529 plans offered in many states. Known an Qualified Tuition Programs (QTP). Tax free earnings when used for tuition, books, room and board.
  • Coverdell Education Saving Account (also known as Education IRA). $2,000 contribution per beneficiary per year. Tax free earnings when used for tuition, books, room and board. Can also be used for k-12 expenses.

 

Tune in for the next Dollars and Sense show on DATE when Carol will discuss NEXT EPISODE TITLE