Homeschool group wishes to grant college scholarships

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Carol,

Our 501(c)(3) non-profit homeschool support organization would like to award a $1000 college scholarship to a graduating senior in our chapter of the Eta Sigma Alpha home school national honor society. The criteria for receiving the scholarship is the student must be a member of our homeschool honor society chapter and be a graduating senior that will be attending college in the fall. The students will be judged on their accomplishments in areas of scholarship, character, service, and leadership.

The plan is that I would donate the $1000 to our 501(c)(3)non-profit home school support organization, which would in turn award the scholarship to a student in our honor society chapter. The scholarship winner would be determined by an independent panel of judges. I would not be one of the judges and I have no children involved in the program.

Are there any hoops we need to jump through to accomplish this?

Janis H in Texas

Janice,
You’re to be commended for establishing a scholarship fund and already having good policies in place.

You should look at your organization’s original application for 501c3 status (Form 1023) to see if included Schedule H Scholarships. If your organization included Schedule H, you’re all set. Award away! :)

If you did not file a Schedule H, then you’ll need to notify the IRS that you are adding a new activity.

According to this IRS webpage, you report changes and additions in your activities on Form 990 or 990EZ.
http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Reporting-Changes-to-IRS

It would be a very good idea to look at the Form 1023 Schedule H (scroll down to page 28) and it’s instructions. From the questions the IRS asks, you get a very good idea of how they think a scholarship fund should be set up. It sounds as if your organization already has in place many of the IRS’s recommendations. Include a paragraph outlining your policies based on Schedule H questions when fling Form 990 or 990EZ.

If your organization does not typically file Form 990 or 990EZ because you are eligible to file the online e-postcard Form 990N (Annual gross revenues less than $50,000), you should file the longer 990EZ for the year you launch the scholarship program.

I hope that helps.

Carol Topp, CPA

How do I know if my organization has lost its tax exempt status?

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Did your nonprofit organization lose your tax exempt status?

What’s this all about?

In 2010, the IRS has begun revoking the tax-exempt status nonprofit organizations that failed to file a Form 990/990EZ or 990N for three years. A large number of these organizations are small nonprofits that were not required to file an annual return (because their gross revenues were $50,000 or less) and didn’t know about the new IRS requirement.

If your organization has not filed any of the 990/990EZ or 990N forms for three years, it is likely your tax exempt status was revoked.

How will I know if my organization has lost its tax-exempt status?

You may have received a letter from the IRS  called a  CP120A.

What if we did not receive a  letter from the IRS?

You may not have not received a letter because your address has changed or you are not in the IRS exempt organizations database. This is true for thousands of tiny organizations or clubs that were not required to file a Form 1023 or 1024 application to be tax exempt.

1. You can search the IRS database here: http://www.irs.gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check

2. If you don’t find your nonprofit’s name in the database, call the IRS Customer Service for exempt organizations at 877-829-5500. Give them your name and Employer Identification Number (EIN). Call early in the morning ( 7:30 or 8:00 am ET) for shortest wait times.

OK, I think our tax exempt status was revoked! Now what?

I can help. Read more here…

Can’t we just call the IRS and get on the list to file Form 990Ns?

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My leadership team is freaking out. We are one of those groups in the 990N discussion. We got our EIN in June 2010 and opened a checking account in December 2010. We always have under $5,000 pass through our books every year.

We have never called the IRS to be added to the 990N list because of lack of knowledge. You mentioned at the homeschool convention in Cincinnati fixing this problem by filing 20-some odd-pages to be reinstated.

Since we have never called to be on the list in the first place could it be, I pray, as simple for us to just call and get on the list and start filing the 990N form?

Sorry this has upset your leadership team.

Wouldn’t have been nice if the IRS had made it easier to comply when you learn about the 990N?

But unfortunately, they revoked your status automatically after 3 years of failing to file the Form 990N, even though you never officially applied.

Then to make things worse, the IRS requires you to file the 26 page Form 1023 to get reinstated, even though you never had to file that  application form in the first place (because your gross income is under $5,000/year).

Here’s my flowchart of the process to get tax exempt status reinstated.

This has made a lot of work for the IRS and they were back logged to begin with!

Fortunately, the IRS is considering a Form 1023EZ which is only 2-3 pages and a lot simpler to fill out than the longer 26-page Form 1023. They hope to have the Form 1023EZ ready by the summer of 2014.

But I wouldn’t hold my breath. The IRS has received some negative feedback  about their proposed Form 1023EZ, saying it is too simple! I agree that it does not go far enough in helping the IRS separate legitimate nonprofits from scammers. I doubt the Form 1023EZ will be ready by this summer.

But maybe you can wait until the fall and the IRS might have a Form 1023EZ by then.

I find that each homeschool group is unique. Some have to go though the IRS process, some are within the time frame and can get tax exemption reinstated easily. I do provide a phone consultation to help organizations figure out what is best for them.

Contact me to arrange a phone call and give your leadership team some peace of mind.

Carol Topp, CPA

Paying Workers in a Homeschool Organization Part 2 podcast

DollarsSenseShow18

Do you pay workers in your homeschool organization?

Do you know what form to to filing with the IRS?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 2 of a 2 part series.

Listen to the podcast

 

Show Notes:

Applying for EIN. Use IRS Form SS-4. Read this helpful article first Getting an EIN from the IRS.

IRS forms to give to independent contractors (IC).

  • Use IRS Form W-9 to collect the IC’s legal name and EIN.
  • Read IRS Pub 15A Employers Supplemental Tax Guide.
  • Give Form 1099MISC to every IC paid more than $600 in a calendar year. Unfortunately Form 1099MISC cannot be printed on your home printer. You must order it from the ITS or buy a set at an office supply store. I use FileTaxes.com to file and mail Form 1099MISC.

IRS forms to give to employees

  • Collect a W-4 and an I-9 (Immigration) from each employee. Get employment forms at IRS.gov
  • Read IRS Pub 15 Employers Tax Guide
  • Give each employee a W-2 at the end of the year. (I use FileTaxes.com to file and mail the W-2′s to the employees)
  • Form 941 or 944 to pay your employer taxes (Social Security and Medicare). Find employment forms at IRS.gov.  I use FileTaxes.com to prepare and file 941/944 or fill in online print and mail.

What to do if you are paid by homeschool organization an receive a 1099MISC

  • File Schedule C Profit or Loss from Business of the Form 1040. List all your income and expenses from being a independent contractor.
  • Pay federal income tax and  self-employment tax (same as Social Security and Medicare for self-employed people) using Schedule SE (attached to your Form 1040.

If you find these forms confusing, consider a private consultation with Carol Topp, the Homeschool CPA. She can help you prepare and file the correct forms.
Carol mentioned a few helpful resources:

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization (short ebook)

Questions and Answers for Homeschool Leaders (ebook)

Money Management in a Homeschool Organization (newly expanded) in paperback or ebook. The Paying Workers ebook is incorporated as a chapter in this book, so you don’t need to purchase both.

Other helpful books and articles for homeschool leaders can be found at HomeschoolCPA.com

 

Be sure to listen to the first part of this podcast (Episode #17) where Carol explains the difference between employees and independent contractors.

How do you find a location for your homeschool co-op?

photo credit: http://www.mcgannconstruction.com/

 

I love the Facebook group I am a homeschool group leader. It’s like as support group for homeschool leaders.

Recently Kate asked,

How do you go about finding a location for your co-op? The church we had in mind wants us to rent the space (about $8000 for the ten month school year) which is not cost effective.

Here are some of the replies she received:

  • Municipal recreation centers
  • Try other churches
  • Public libraries
  • Vets halls, VFW Halls, American Legion Halls
  • Homeowner clubhouses
  • Boys & Girls clubs.  More than one leader commented that their local Boys and Girls Clubs were used by homeschool co-op during the day.
  • Places that offer after school programming. Lots of times they are empty during the day.
  • Public parks with buildings.

What a great list of ideas! I’d never thought of some of them.

Where does your co-op met?

Should my homeschool nonprofit corporation have members?

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Carol,

I’m filling out the paperwork for my homeschool co-op to be a nonprofit corporation in my state. They ask “Does your organization have members?” We have families that pay for co-op classes and we call them members. Is this what the form is asking?

Joann in IN

Joann,

The state is asking about members of your corporation, not what you call members who participate in your homeschool co-op classes.

Here’s a helpful explanation from Nolo.com

Although a nonprofit corporation can choose to have members who have voting rights, many nonprofit corporations decide not to adopt a membership structure and, in the interests of efficiency, leave the decision making up to the directors. If a nonprofit does opt for a membership structure, the members participate in major corporate decisions. Specifically, the members have the exclusive right to elect directors, amend articles and bylaws, and vote on a merger or dissolution of the corporation.

I have found that most homeschool co-ops are run by a board and do not have members participate in decision making or vote on anything.

One homeschool group incorrectly checked the box on their nonprofit corporation application stating they had members. Later, they needed to amend their Articles of Incorporation  when applying for 501c3 tax exempt status with the IRS. This meant they had to gather the members together for a vote to amend the Articles. This was not easy because co-op classes had ended for the summer and the members no longer gathered together. It also involved explaining complicated IRS language to a group of people who didn’t really care, gathering ballots for votes, etc.

So be careful about what you are agreeing to when you check the box stating your nonprofit homeschool corporation has members.

Carol Topp, CPA

 

Paying Workers in a Homeschool Organization Part 1 podcast

DollarsSenseShow17

Do you pay workers in your homeschool organization?

Are they employees or independent contractors? Do you know the difference?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 1 of a 2 part series.

Listen to the podcast here.

Carol mentioned a few helpful resources:

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization (short ebook)

Questions and Answers for Homeschool Leaders (ebook)

Money Management in a Homeschool Organization (newly expanded) in paperback or ebook. The Paying Workers ebook is incorporated as a chapter in this book, so you don’t need to purchase both.

 

 

Be sure to listen to the second part of this podcast when Carol shares what forms you need to be filing with the IRS when you pay workers.

IRS Proposes Form 1023-EZ

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The IRS is proposing a Form 1023-EZ to make applying for tax exempt status a bit easier.

See the proposed Form 1023-EZ

The instructions for the proposed form state that it can only be used by organizations that expect to be relatively small with no more than $200,000 in annual gross receipts and no more than $500,000 in total assets and are not churches, schools, hospitals, supporting organizations. There are other restrictions on who can use the Form 1023-EZ. See the checklist for eligibility here. Scroll down to page 33 and 34.

That describes almost all of the homeschool organizations I know.

This Form 1023-EZ could be a huge help to small homeschool organizations that need to file the Form 1023 to apply for tax exempt status or by organizations that had their tax exempt status revoked for failing to file the Form 990N for 3 consecutive years.

The Form 1023-EZ is not quite ready yet, but I’ll announce it here and on my Facebook page when it is ready. You can sign up for my email list on the sidebar to the right and will get notification that the Form 1023-EZ is ready (and a lot of other helpful information!)

Carol Topp, CPA

 

 

Lost your tax exept status? I can help.

Did your nonprofit organization lose your tax exempt status?

What’s this all about?

In 2010, the IRS has begun revoking the tax-exempt status of nonprofit organizations that failed to file a Form 990/990EZ or 990N for three years.

A large number of these organizations were small nonprofits that were not required to file an annual Form 990 because their gross revenues were $50,000 or less and many didn’t know about the new IRS requirement.

If your organization has not filed any of the 990/990EZ/990N forms for three years, it is likely your tax exempt status was revoked.

How will I know if my organization has lost its tax-exempt status?

The IRS may have sent a letter . If not, read more here…

OK, I think our tax exempt status was revoked! Now what?

Don’t panic. The IRS has a procedure to get your tax exempt status reinstated. It involves paperwork (the IRS loves paper) and filing fees of $400 or $850.

Here’s a flowchart I designed to explain the IRS procedure in pictures.

We need help getting through this!

I can help. I offer a phone consultation with your board or leaders to discuss where you are, what options your have what it will cost to get your tax exempt status reinstated. Contact me to set up a phone call.

It’s helpful to me if you fill in this Questionnaire.

What will this cost me?

My fees for reinstating tax exempt status are:

Consultation on eligibility for IRS streamlined reinstatement and Form 1023-EZ (organizations with annual gross income of $50,000 or less may be eligible for Form 1023-EZ): Includes verifying your organizing documents fulfill the IRS requirements and required IRS statements: $60 per hour. Estimate 2-3 hours.

Prepare Form 1023: (for organizations not eligible to use the shorter Form 1023-EZ) Includes verifying your organizing documents fulfill the IRS requirements and required IRS statements: $600

Prior Year(s) Form 990EZ Annual Information Return:
Annual gross income under $50,000: $100 per return
Annual gross income more than $50,000: $250 per return

 

Carol Topp, CPA

 

 

Happy 10th Birthday HomeschoolCPA!

Happy10 HSCPA

In May  2004, I attended a meeting of homeschool group leaders and learned they were terribly confused about their status as nonprofit organizations, money and the IRS.

I wrote a three page letter to one of the leaders trying to clear her confusion. That letter turned into several articles and I launched a website called HomeschoolCPA.com in 2006. It’s grown to over 300 blog posts, 600 subscribers and dozens of articles

I went on to write books and started speaking at homeschool conventions. I’ve written 5 books for homeschool leaders and visited 10 states talking to homeschool leaders.

I try to serve as an ambassador to homeschool leaders interpreting IRS regulations to them. I even named my self-publishing company Ambassador Publishing.

I have my work cut out for me, don’t I?

So Happy 10th Birthday to HomeschoolCPA!

 

Carol Topp, CPA