Hi Carol,

 

We wanted to share our excitement in that Hartsville Home Educators, Inc. of Hartsville SC has been granted their 501(c)(3) status.

You have been a great help to our organization as we have developed by-laws and our co-op. We purchased your book and submitted our IRS application in May and was awarded our status in November.

Thanks for all you do for the home school organizations throughout the country.  We could not have done this without your guidance.

Terri King

Hartsville Home Educators

Do you know the pros and cons of 501c3 status?

Do you know what 501c3 status could mean for your homeschool group?

My book The IRS and Your Homeschool Organization could help your group as well.

A 120 page book explaining the pros and cons of tax exempt 501c3 status. Is it needed? Is it worth it?

Table of Contents
Sample pages

Price: $9.95

Ebook version $3.99 (pdf format)

Kindle version $3.99

Smashwords version $3.99 (multiple e-reader formats for Kindle, Nook, Sony, etc)

The National Taxpayer Advocate’s 12/31/2011 Report to Congress is critical of IRS delays in releasing the Cyber Assistant and recommends that Congress require the IRS to move forward on making it available. (You can view this report at http://www.irs.gov/advocate/article/0,,id=252216,00.htmlis.)

In response, the IRS said, “Software testing revealed problems requiring correction prior to public launch, and the IRS had to delay the release. Because the IRS must balance a number of competing information technology needs, we cannot presently predict when Cyber Assistant will be available.”

So it looks as if the Cyber Assistant is on the back burner for now.

Sandy Deja
501c3book.com
Author of Prepare Your Own 501(c)(3) Application

Background: Cyber Assist was (is?) the IRS’s program to allow nonprofits to apply for tax exempt status online. The IRS was proposing to lower the application fee from $400 or $850 to only $200 for organizations applying online using Cyber Assist.

Thank you Sandy for the update, even if it’s not what we want to hear…

Homeschool leaders, Sandy has a terrific website http://501c3book.org/ and ebook Prepare Your Own 501(c)(3) Application to help you apply for 501c3 tax exempt status. Don’t go down that road alone!

Carol Topp, CPA

In particular, many homeschool groups wonder if they should file for LLC status as part of becoming a 501(c)(3) tax exempt organization.

Caution:  I am not an attorney, nor am I offering legal advice.  I will relay what I have leaned about LLC’s filing for 501c3 tax exemption from the IRS, but I am not offering a legal opinion. I recommend that you seek legal counsel if you pursue either option.

Only recently has the IRS granted 501c3 tax exempt status to LLCs. LLCs are a relatively new business structure (only available in all 50 states in the mid 1980′s) and the IRS is slow to accept changes. In a document titled “Limited Liability Companies as Exempt Organizations-Update” (2001 Exempt Organization CPE Text. Available at http://www.irs.gov/pub/irs-tege/eotopicb01.pdf ) the IRS outlined 12 conditions that an LLC must satisfy to qualify for exemption under IRC (Internal Revenue Code) 501c3.

These conditions are legally complex and I would strongly recommend that you seek experienced legal counsel before organizing a nonprofit LLC.

I read an article titled “Nonprofit LLCs: Time for a New Experiment” (http://www.mayer-riser.com/Articles/nonprofit/npllc.htm) and the author, a nonprofit attorney, advises:

Until state legislatures address the unresolved issues, the actual use of the LLC form by nonprofit organizations should be undertaken only after careful review of current law in the applicable jurisdictions, and only with the assistance of qualified counsel with experience in drafting complex and detailed operating agreements and experience in the law of tax-exempt organizations.

Unfortunately, at the time of the article in 2002, only 11 organizations had obtained 501c3 status as LLCs, so experienced assistance may be difficult to find.

The reason that most businesses use the LLC structure 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 most homeschool groups, nonprofit corporation status in your state brings similar protections of limited liability. If your main reason for seeking LLC structure is for limited liability, nonprofit incorporation in your state is the easier option.

Carol Topp, CPA

I am not an attorney, nor am I offering legal advice. I recommend that you seek legal counsel if you have additional questions or pursue Limited Liability Company status.

There are my most important blog posts.

I refer homeschool leaders to these blog posts most frequently.

These are keepers!

Print them put and share them with your homeschool leader.

Is your homeschool co-op’s hired teacher really an employee?

We’re not 501c3 and don’t want to be!

Do not use individual fund raising accounts

Are Homeschool Support Groups Automatically Tax Exempt?

What business structure and tax forms are needed for a new homeschool co-op?

Carol Topp, CPA

Hi Carol,

I just read this and was concerned that I would need to file something during the 27 months time frame.  Please explain if possible.
http://www.irs.gov/charities/article/0,,id=156389,00.html

Teri

Teri,

The link to the IRS website concerns IRS requirements before you apply for tax exempt status. The link above states this (in part)

Tax Law Compliance Before Exempt Status Is Recognized

An organization that claims tax-exempt status under section 501(a), but has not yet received an IRS letter recognizing exempt status, is generally required to file an annual exempt organization return.

This is a fairly new requirement from the IRS. I used to tell nonprofit organizations that if they had not yet applied for 501c3 status, they did not have to file the Form 990. It came to my attention only a week ago that the IRS wants Form 990 from all nonprofits.

Fortunately, the form your organization (and all small nonprofits with annual gross revenues of less than $50,000) would need to file is the 990N, an electronic postcard that asks about 5 questions: Name and address of organization, the principle officer’s name and check a box that your annual gross revenues are under $25,000. It is very short and would take less than 5 minutes once a year.

Here’s a blog post that answers your question. http://homeschoolcpa.com/does-new-irs-990n-apply/

I hope that helps.

Carol Topp, CPA

My webinar is this Thursday, Oct 27, 2011 at 8 pm ET

This handout of the Slides will be very helpful as you listen in to the webinar:

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

The Myerstown Enrichment Center in PA was just granted 501(c)(3) tax exempt status with the IRS!

The homeschool co-op decided to apply for tax exempt status with  the IRS on their own. But unfortunately they ran into some snags.

They had checked a box to apply as a school, but the IRS suggested they did not fit the description of a school.

One of their leaders wrote to me:

I have gotten several letters from the IRS requesting more information or explanations of something.  Each time, my time to respond gets shorter and shorter. I am feeling very unqualified to continue.

I helped them sort things out with the IRS, wrote a letter, talked to the IRS examiner and faxed her information when asked.

We are so pleased to announce that they are now a 501(c)(3) tax exempt organization!

The leader told me:

Something for you to consider:  mention in your seminar that co-ops are applying for 509(a)(2)* under 501 (c)(3) and then maybe those of us who are confident enough to fill out our own forms might get it right the first time.
Or, you could create a self-help packet to sell to said individuals.

* an organization that receives its income from membership fees or activities related to its purpose and not a school

The other week, the president and I were discussing this whole process and we regret that we just didn’t have you do it for us from the beginning.

Again, thank you for your help!
God bless you!

I am working on putting the final touches on that “self-help” packet mentioned; it’s an ebook titled “The IRS and Your Homeschool Organization. I hope to release it in September.

Carol Topp, CPA

photo credit: Keith Williamson

I just uploaded a new article onto my Leader Tools/Articles page

Are support groups automatically tax exempt?

It discusses the difference between homeschool co-ops and support groups in the eyes of the IRS and the benefits of being a support group!

Here’s what one homeschool leader said when I shared this article:

The path I believe we will go down is to become a  Non Profit Corporation and then (be a) 501(c)7.  You provide a great and much needed service to homeschooler support groups and co-ops.  I wish our previous board knew about you and your web site.  I certainly will be spreading the word.

Thanks again.  I hope I get to meet you in person some day.

Jeff

If you haven’t read the articles on my Leader Tools page in a while, why not print some out and share them with your board?

Helping you lead your homeschool group,

Carol Topp, CPA