This week April 19-21 is the Midwest Homeschool Convention in Cincinnati.

Come by my booth #405, near the front of the exhibit hall.

Then hear me speak on the following topics:

What Your Teenager Can Learn from Starting a Micro Business Friday April 20 at 1:00 pm in the Millennium Hotel Colonnade room

Homeschool Co-ops: How to Start Them, Run Them, and Not Burn Out Friday April 20 at 2:30 pm in Duke Convention Center Room 250

The IRS and Your Homeschool Group Saturday April 21 at 10:00 am in Duke 234

How You (or Your Child) Can be a Published Author Saturday April 21 at 4:00 pm in in the Millennium Hotel Colonnade room

Carol Topp, CPA

Related posts:

1. See you in Cincinnati?
2. Meet Carol Topp at a homeschool convention near you!
3. HomeschoolCPA ebooks mentioned by HSLDA

Hello, Carol.

I have learned so much from your website. Thank you for your expertise. I am part of a co-op and we need to open a bank account. I am in Texas.

My bank told me that we need the “assumed name certificate” as well as the EIN. We do not have an “owner.” Do I file as a Limited Liability Company?

Jennifer L
Texas

Jennifer,
I’m glad my website was helpful.

Becoming a Limited Liability Company (LLC) is a complicated issue for nonprofits.  Most small nonprofits such as your homeschool co-op do not become LLC’s because the IRS has 12 conditions that must be met for the LLC to be tax exempt. It may be more than you cared to learn, but it is important to understand the complexity of nonprofit LLC status.

Here’s a helpful article discussing LLC status and IRS tax exempt 501(c)(3) status.

http://www.insightcced.org/uploads/publications/legal/LLCs-as-exempt-orgs.pdf

The reason that most for-profit businesses obtain the LLC status is for limited liability. I organized my own sole proprietorship accounting practice as an LLC  because I wanted limited liability and protection of my personal assets.

For a nonprofit organization such as your homeschool co-op, nonprofit corporation status in your state brings similar protections of limited liability.

So if your main reason for seeking LLC structure is for limited liability, nonprofit incorporation in your state is the simpler option.

Read more about nonprofit incorporation here: http://homeschoolcpa.com/leader-tools/articles/ or in my latest book, The IRS and Your Homeschool Organization.

Now my “lawyer” words:

The information contained on this site is designed to provide accurate information in regard to the subject matter covered. However, this site is  not a substitute for legal guidance. This information is provided with the understanding that the author is not engaged in rendering legal advice. If such advice is required, the services of a competent legal professional should be secured.

Carol Topp, CPA

Related posts:

1. Should your homeschool group be an LLC?
2. IRS Intimidates Homeschool Group
3. What tax forms do I file for a homeschool co-op?

Practical Homeschool magazine shares an article written by homeschool mom and co-op teacher, Linda M. Burklin.

Hybrid Homeschool Classes

Linda loved teaching English Literature and Composition at her homeschool co-op, but found that managing her own seven children and co-op was exhausting. Instead of quitting teaching, she came up with the idea of a hybrid class.

She combined email instruction with occasional “seminar” for a small class of students (6 total). She shifted a lot of the teaching burden onto the homeschool parent and student.

Linda explains in detail how she organized her hybrid class here:

http://www.home-school.com/Articles/phs67-lindaburklin.html

Take some inspiration from Linda and try a hybrid class, using email for sharing lessons and homework.

Just another way homeschool parents can be creative in how they educate their children!

Carol Topp, CPA

No related posts.

On the application form (Form 1023), the IRS asks about scholarships and Tricia asks:

 We do provide scholarships for our members that cannot pay their $30 membership fee.  Should we check “yes” for line 22?

Part VIII, Line 22 is for “real” scholarships like the kind a high school graduate is given to go to college.

What your group offers is a fee discount. I find that co-ops frequently call these fee discounts “scholarships.” That is the wrong word to use.

Do not call a fee discount a scholarship.

I recommend that you change your wording in your co-op and especially change the word on your application to the IRS.

I think you should check the box NO. You do not provide scholarships as the IRS is using the word.

Carol Topp, CPA

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Hi Carol.

Thank you for all the help you have already given our homeschool community!

There is a homeschool co-op that allows teachers to charge the parents $0-$45 per student.  As a teacher, how would I report any net income on my income tax return? (payments are made directly to the teacher).

Best regards,

Lynn (New York)

Lynn,

You report all your income and expenses on a Schedule C or the shorter form Schedule C-EZ as part of your federal form 1040.
The net amount is carried onto page one of your 1040 and added to your other income  from W-2s etc.

If you made more than $400 in net income in 2011, you will also have to fill in a Schedule SE and pay Self-employment tax (its Social Security and Medicare taxes for self-employed people).

Hope that helps!

Carol Topp, CPA

Homeschool leaders: If you hired and paid a teacher in 2011 you may need to filing some paperwork with the IRS! The deadline is January 31, 2012 to give your workers a 1099MISC or W-2.

Find out what to do in my ebook Paying Workers in a Homeschool Organization.

Only $3.00.

Related posts:

1. What tax forms do I file for a homeschool co-op?
2. What business structure and tax forms are needed for a new homeschool co-op?
3. Is your homeschool co-op’s hired teacher really an employee?

photo credit: stevendepolo

Carol’s book has been so helpful in getting our co-op organized. We have determined we are going to file Articles with our state and create by-laws and set ourselves up for a non profit corporation. With our fundraising and dues, we never bring in more than  $5,000. We probably have around 50-60 families returning this year. We are 100% volunteer based for our fundraising (silent auctions, garage sale.)
Come tax time, do we file with the IRS (like I do for our household every year?) For example, do we use turbo tax and file for our co-op? And if we have let’s say, $1,000 left at the end of the year, is that taxable? We do not want to zero out our account as it is nice to have a cushion for various reasons.

Lisa

Lisa,

Good questions!

Q: Come tax time, do we  file with the IRS (like I do for our household every year?) For example, do we  use turbo tax and file for our co-op?

A: Nope. This is a nonprofit organization, not part of your family/individual income, and not a for-profit business, either. Don’t use TurboTax. Please! (we tax preparers are not crazy about TT in general)

Technically, you would file a corporate tax return (Form 1120), but I would not recommend doing that.

Since your group qualifies as an automatic 501(c)(3) tax exempt organization (under $5,000 gross annual income), you could file a Form 990N. It’s an online form of only 5 questions. You may have to call and register with the IRS first, since you are not in their database. But many small nonprofits do not file the Form 990N at all.

(If you make more than $5,000 gross annual income, you must apply for tax exempt status and then will file the Form 990N or the Form 990EZ or the full 990 depending on the gross income of your organization. If your nonprofit has gross income of $50,000 or less, you file the Form 990N. That covers 99% of all homeschool organizations.  So the paperwork is quite small and easy to deal with.)

The IRS expects nonprofit corporations to file for tax exempt status with in 27 months of formation (the date of your nonprofit incorporation status from your state). So you have about 2 years to run your program before you have to file for tax exempt status. In the meantime, you can file Form 990N each year.

Q: And if we have let’s say, $1,000 left at the end of the year, is that taxable?
A: Taxable, unless you qualify for tax exempt status (either automatically or by application).
Q:We do not want to zero out our account as it is nice to have a cushion for various reasons.
A: Yes, that the reason why groups want tax exempt status. To reserve their surplus for future use. It’s a wonderful blessing in the USA that our gov’t allows charitable, religious and educational organizations to exist tax free. Not every country allows that!

Hope that helps!

Carol Topp, CPA

P.S. I’m glad my books were helpful. I have just updated my book on  501(c)(3) tax exempt status for homeschool groups. It’s called  The IRS and Your Homeschool Organization and covers all this information in greater detail. Read about it here.

Related posts:

1. More nonprofits can file the easy Form 990N
2. Does a nonprofit need to file any tax returns before they apply for tax exempt status?
3. What business structure and tax forms are needed for a new homeschool co-op?

This review is from: Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out (Paperback)

It’s a good starting point but it often refers to her website or other publications. The title announces a how-to book and since she is a cpa I was expecting “pure” legal advice – there are too many references to the Bible which is not necessary for the purpose of the book and frankly, becomes annoying. I have nothing against Christianity since I was raised as a Christian, but the subject of the book has nothing to do with the Bible.

HomeschoolCPA.com

No related posts.

We live in California and started a homeschool group about 5 years ago. We average about 80 families a year. We are strictly social/support, not a co-op. We have different clubs that meet once a month.  These are taught by moms who want to and all parents stay and participate. We also have parties and take field trips together.

We do collect $20 a year per family to off-set the cost of parties and clubs so that no one person has a financial burden. We have kept things simple all of this time and operate on a cash only basis. We carry over a balance to make sure that our kick-off parties are paid for. We collect approx. $1600.

My question is- Am I doing everything legally? It is my intention to make sure I am being legal. I would like to continue to keep things this simple

I have had some doubt due to the homeschool co-op in town that has a 501 (tax exempt status) and charges members higher prices due to church rental and insurance. However, I have been questioned why we don’t have to do that?

Any insight would be helpful.

Thank you!
Vanessa

I think you’re understanding things correctly and doing many things just fine for a group of your size.

Technically, your support group would be considered an unincorporated association and the IRS would probably classify it as a 501c7 Social Club. I discuss Social Clubs on these two blog posts:
Are Homeschool Support Groups Automatically Tax Exempt?
Compare 501(c)(3) Charity to 501(c)(7) Social Club

Homeschool co-ops are different from support groups. Co-ops do not usually fit the definition of 501c7 Social Clubs; They exist for more than just social reasons; they have an educational  purpose. In additional co-ops collect more money than support groups and so they look into 501c3 status as a tax exempt educational organization.

So, Vanessa, you can tell people who ask that support groups and co-ops are different. The link above compares the two.

Carol Topp, CPA

Related posts:

1. Are Homeschool Support Groups Automatically Tax Exempt?
2. Should your homeschool group be a 501c7 social club?
3. New article on homeschool support groups and the IRS

Check out the entire site, but I found the Practical Helps page useful.

http://www.hslda.org/GroupServices/Leaders.aspx/PracticalHelps

There I found articles on

• conflict
• common co-op problems
• how to welcome families of handicapped students
• tips on activities for groups
• field trip guidelines

and a link to my book  Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out

Vicki Bentley, the HSLDA Group Services Director, explains the site is still under construction and plans to add many more articles.

Thanks to HSLDA for creating a site to help homeschool leaders.

Carol Topp, CPA

Related posts:

1. HomeschoolCPA ebooks mentioned by HSLDA
2. Alert to homeschool leaders
3. Paying co-op leaders

Hi Carol,

I would really like to homeschool my 3 children next year and would also like to pick up my daughter’s best friend as well. She and her mother have expressed an interest in having me homeschool her. I live in Maryland and am having a hard time finding info on whether or not I can do that and how to go about it. Do you have any info on that kind of thing? From what I understand, I would have to start up a small business. My question is would I have to be a licensed childcare provider? She is 9 years old, and her brother is 4 and I was considering schooling him also.

Thanks ahead of time for any help you can give me!
Karen

I’m not an attorney nor familiar with MD homeschool laws, so you’ll have to do some homework on whether it is legal to homeschool other people’s children.

Some states allow it; others apply restrictions. Many states do not address it at all!

Start with this helpful diagram from Homeschool Legal Advantage: http://homeschoollegaladvantage.com/statelaws/Maryland_Revised_09.pdf

and this explanation from HSLDA: http://www.hslda.org/laws/analysis/Maryland.pdf

You could also contact the Maryland Home education Association at http://www.mhea.com/askmhea.htm

Then at the A to Z Home’’s Cool website (http://homeschooling.gomilpitas.com/laws/blMD.htm) I found this comment on using tutors and ‘alternative resources’ from the President of the Homeschool Association of Harford & Surrounding Areas

On the issue of tutoring and how much or use of alternative resource a homeschoolers uses, this is a huge NON issue. As long as the parents are overseeing the homeschooling program there is no issue or fear of using educational services.

I hope that’s a start!

P.S. For those of you outside of MD, You’ll have to do some homework for the homeschooling laws in your state. The links I share are a good place to start!

Carol Topp, CPA

Related posts:

1. Is it a homeschool co-op or Mary Poppins?
2. 5 Ways a Homeschool Co-op Can Benefit Your Child