Summer reading to be a better homeschool leader: The IRS and Your Homeschool organization

Summer is a great time for homeschool leaders to catch up on some reading. I’m highlighting a book each week of summer and this week I’m spotlighting,

I know it’s not a catchy title, but it explains what the book is about. I have no expectations of this book ever being a best seller, but I wrote it to be helpful to the hundreds of homeschool organizations that need to understand tax exempt status.
This book began in 2008 under the title of  Tax Exempt 501c3 Status for Homeschool Organizations with a cover as boring as the title. It was an ebook with only 51 pages.
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In 2011, I expanded the book to 124 pages and changed the title to The IRS and Your Homeschool Organization with the subtitle Tax Exempt 501c3 Status for Homeschool Organizations. And I improved the cover.

IRS and Your Homeschool Org cover

After the IRS simplified the process to apply for 501(c)(3) status in 2014, I updated the book. The second edition includes a chapter on getting tax exempt status reinstated if it is revoked. I also added an index to make finding specific topics easier.
Who should read this book?
  • Anyone running a homeschool organization that’s been around a long time but has never filed anything with the IRS.
  • Anyone who mistakenly thinks they don’t have to do any annual reports to the IRS.
  • Anyone who fears their previous leaders did not do things properly.
  • Anyone starting a new homeschool organization and wants to be sure they are set up properly.

Here’s a special for the summer. Buy my books for homeschool leaders at 25% off. Get paperback versions for $7.50 (usual price $9.95) or ebooks for $3.99 (usual price is $4.95).

Order The IRS and Your Homeschool Organization


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Checklist for homeschool co-op

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We are going through the process to create a non profit homeschool co-op and were wondering how much it would cost for you to review our paper work or how much it would cost for you to do and submit our paperwork.

Candace

Candace,

I have a listing of my fees here: http://homeschoolcpa.com/services/

My services vary depending on what you mean by “filing your paperwork.” There’s paperwork with your state and paperwork with the IRS. I can help with both types of filings.

Here’s a helpful checklist to keep it all straight!

Carol Topp, CPA

 


 

Candace’s question prompted me to update my Checklist for Homeschool Organizations Applying for Tax Exempt Status.

I know that forming a nonprofit organization and applying for tax exempt status can be confusing. There are just too many unfamiliar terms, IRS thresholds, steps to take and numbers!

This checklist will help you know the steps to take and the correct order.

If you need help at any step or want a personal consultation to discuss your unique situation, please contact me.

I am available to assist your homeschool organization every step of the way. Through my blog posts, books, podcast, and consultations, I try to make confusing IRS rules easy to understand. I have assisted over 80 organizations receive 501c tax exempt status.

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Carol Topp, CPA

HomeschoolCPA.com

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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!
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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.
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 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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HomeschoolCPA increased my fees, but you’ll get more!

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I don’t do this often, but I recently increased some of my fees.

My popular phone consultation fee is the same at $60/hour.

My fee preparing the IRS Form 1023-EZ application for 501(c)(3) status for small organizations has increased from $150 to $250.

But starting July 1, 2016 the IRS fee for Form 1023-EZ drops from $400 to $275, so overall your total fee will be less than before. Gotta like that.

Additionally, I used to charge separately for reviewing your Articles of Incorporation  for compliance with the IRS 501(c)(3) rules. Now that will be included in the $250 fee.

And I will also include a letter explaining what your state filing requirements will be for your newly formed 501(c)(3) organization. I used to charge separately for that as well, but it’s now included.

So, your homeschool group can apply for 501(c)(3) status (or get reinstated if your tax exempt status was revoked because you failed to file the annual Form 990-Ns) for less money and get more services!

What’s not to like about that?

Helping homeschool leaders,

 

Carol Topp, CPA

HomeschoolCPA.com

 

 

 

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Homeschool co-op gives “scholarships.” What are the tax liabilities?

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I am curious how a scholarship for a family works in terms of tax liability in an all volunteer co-op with no payment to teachers, board members, etc. Each family pays a membership fee which covers expenses for family events, insurance, state filing fees, etc.

For example, family A donates the amount of a family membership to the organization. The board notices that Family B is out of work and therefore credits the amount paid by Family A to Family B’s registration fees. Family B still pays things like class fees, but the annual registration was not paid by Family B.

What duty does the co-op have in terms of tax liability for itself and are there any potential pitfalls to be aware of?
Marisa

Marisa,

Your organization does not have to give the recipient of a benevolent gift any documentation. Some homeschool organization call this gift a tuition discount or a “scholarship.”  Read here why I don’t like the word scholarship when you are really giving a needy family a tuition discount.

The donor can be given a receipt for their donation. Taxpayers must have a receipt if the donation is more than $250, so frequently charitable organizations give every donor a receipt (an email is OK). Be sure to include the statement that “No goods or services were received in exchange for this contribution.”

The IRS requires 501c3 organizations filing a Form 990 with a total of more than $5,000/year in grants or assistance to individuals to keep a record of the amounts and purpose of the grants. These records are submitted to the IRS on Form 990 Schedule I. These records are not reported to the IRS if your organization files a 990-EZ or 990-N. In other words, only large charities (more than $200,000 in annual revenues) report information on the grants to individuals. The names of the individuals are not given to the IRS, just the amount and purpose of the assistance.

IRS Publication 4221PC has guidelines to follow regarding charitable gifts and record keeping.
It’s kind of a dry publication, but very important. The IRS used to mail Pub 4221 with your letter approving 501c3 status, but stopped doing that several years ago to save printing costs. It’s such an important publication that I recommend treasurers read it regularly, maybe once a year. Find it online here: https://www.irs.gov/pub/irs-pdf/p4221pc.pdf

Hope that helps,

Carol Topp, CPA

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

Sponsoring fundraising groups

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Hello Carol!

We have a question about fundraising and sponsoring subgroups.  Our homeschool group is planning on filing for 501c3 soon (if we can’t figure it out, we are hiring you!).  We have a subgroup (Destination Imagination, comprised of a few smaller groups of kids) that wants to raise money by working basketball games themselves but use our insurance and have us deal with paperwork and money.

We will have a clear understanding of who gets what money and when before we vote on it. They have proposed we keep 5% for our trouble. We are all wanting to say yes, but as president, I need to make sure it’s okay rule/law-wise.

Can you think of a reason not to allow this?

Kristen in Oklahoma

Kristen,

Good luck in your 501c3 application. I can also review the application you fill out. It’s a less expensive option.

What you are proposing is called “fiscal sponsorship” or sometimes “fiscal agency.” It means that one nonprofit organization  acts as a sponsor for a project or group that does not have its own tax-exempt status. And as you spelled out, it is typical for the sponsor to charge a fee (5% in your case) for managing the  other project or group.

Google “fiscal sponsorship” to get a better idea of what’s involved.

I would recommend you wait until you have tax exempt status (or at least have applied for it) before considering a fiscal sponsor arrangement.

Also put the agreement in writing, so all parties know what is required of the and the length of the agreement (at most one year and renew it every year). Sounds like you were going to do that.

Make sure the arrangement doesn’t put you over any IRS threshold. For example, if your gross annual revenue is more than $50,000/year, you will need to file the Form 990-EZ or 990, not the simple online Form 990-N. If Destination Imagination income causes  you to hire someone to prepare the more complex Form 990-EZ/990, are you making enough from DI to cover that added expense?

Carol Topp, CPA

 

Adding religious purpose to bylaws and Articles

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Dear Carol

Our homeschool group is currently a 501(c)(3) association that was organized in 1986. Our articles of association were recently found and we find out that we are NOT a Christian group, even though many of us are Christian and we are recognized by the community as a Christian group.
Will switching from a secular to a Christian homeschool cause us to lose our funds in the back account or to cause any fee to be incurred by the IRS?

Becky W

Becky,
It is hard for me to advise you without seeing the Articles of Association or your 501(c)(3) application. If you have electronic copies and can sent them to me, it would be helpful.Your Articles of Association (or Articles of Incorporation) and your 501(c)(3) application define your group’s purpose.

Your bylaws and policy manual are where you you explain how you fulfill that purpose. For example, you might include a Statement of Faith in your bylaws, or a membership requirement that members need to be Christians, etc. It’s very simple to change bylaws. You simply get the board to vote  a change. Follow whatever your bylaws  say is needed to change the bylaws.

Nonprofit corporations that wish to add a religious purpose to their Articles of Incorporation, do that by amending the Articles of Incorporation with their secretary of state. These groups need a vote by the board (as outlined in their bylaws) to make changes to the Articles.

(In Becky’s case, her organization is an unincorporated association and is not required to file any Articles of Association or changes to the AoA with the state).

You asked: “Will switching from a secular to a Christian homeschool cause us to lose our funds in the back account or to cause any fee to be incurred by the IRS?You should not lose your funds, but your board needs to approve all changes to the bylaws and Articles of Association.

You could perhaps contact the IRS (via a letter) if you wish to add to the scope of your 501c3 tax exempt application (i.e add that you have a religious purpose).

If you can dig out your 501c3 application (Form 1023) and read what you originally told the IRS, it would be helpful. The religious purpose may already be  mentioned.

I hope that helps.

 Carol Topp, CPA

Time off needed. HomeschoolCPA thanks you for your patience.

 

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Dear readers,

I will not be able to reply to your emails or posts here as quickly as I would like. I need to take a week or two off of work to help my 25 year old daughter who broke her leg this past weekend.

She cannot do much in her own. She needs help from two people to get into and out of bed, get to the bathroom,eat, etc. She is not to be left alone. I’m grateful that I work from home and that frequently my husband can work from home as well.

I’m also grateful that her accident (she slipped down a steep hill) happened one week after she moved back to Cincinnati, so we can take care of her.

Please pray for her pain to lessen and her healing to be quick.

Thank you for your patience.

Carol Topp, CPA
homeschoolCPA.com

IRS lowers fees on Form 1023-EZ

 

 PRICE CUT:  $400   $275

 

The IRS recently announced in Revenue Procedure 2016-32, dated May 31, 2016 that it will be decreasing the Form 1023-EZ user fee from $400 to $275.

The fee reduction will be effective July 1, 2016.

If you are about to file, waiting until after July 1 could save you $125.

The Form 1023-EZ in an online application for 501(c)(3) tax exempt status. Organizations must have less than $50,000 in annual gross revenues and meet other eligibility tests to use the Form 1023-EZ.

 

If you need assistance in determining your homeschool organization’s eligibility for use the Form 0123-EZ or assistance in completing the form, please contact me. I’ve assisted more than 20 homeschool organizations apply for 501c3 tax exempt status using the Form 1023-EZ.

Carol Topp, CPA