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


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.

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.

Home School Legal Defense Association has an explanation of some states’ tax breaks or credits:

Ann Zeise of A to Z Home’s Cool has a great, detailed and lengthy post of tax write-offs for homeschoolers:

 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



How to change the responsible party name on your EIN


A Balarman from Free Digital Photos

From Elaine’s Tax Tips for Nonprofits

New IRS Form 8822-B Requires Action By Virtually All Organizations

In an effort to update its records, the IRS is requiring any organization or entity that obtains an employer identification number (EIN) to report to the IRS a change in the “responsible party” within 60 days of that change.  This change is reported using Form 8822-B, Change of Address or Responsible Party – Business.  This is a good thing as it helps to provide assurance that critical communications from the IRS will not be directed to a person who is no longer associated with an entity.  However, in its efforts to update contact information, the IRS is requiring virtually every entity to provide current information.

Who is a “Responsible Party”
Currently the application for an EIN requests the name and identifying number of the “responsible party”.  This is defined to be as the person who has a level of control over, or entitlement to, the funds or assets in the entity and the disposition of its funds and assets.  This is a fairly general definition and may actually apply to multiple people within an entity.  However, when applying for the EIN, an entity is only required to list one responsible party.  In essence, this is listed as the primary contact for the entity and provides assurance that mail sent from the IRS will be directed to someone with enough authority to deal with the issue at hand.

Why does this affect so many entities?
The complication enters the picture with the direction from the IRS that if the “responsible party” has changed prior to 2014, then the entity must file the Form 8822-B no later than March 1, 2014.  Prior to January 2010, the term “responsible party” did not exist.  Therefore, it can be presumed that if an entity obtained its EIN prior to January 2010, it should file the Form 8822-B by March 1, 2014 to declare its “responsible party”.    If an entity gained its EIN after January 2010, then it should check its application to see who was listed as the “responsible party” to determine if the filing is required.  For the future, entities should understand that the “responsible party” must be updated in the event the listed party leaves the entity.

Get  Form 8822-B here

From Carol Topp, Homeschool CPA: Homeschool leaders may be concerned about including their name and SSN on the EIN application. Until recently, a nonprofit leader had to call and write a letter to the IRS to get their name removed from an organizations EIN. I’m glad to see the IRS now has a simple form to fill out.

Carol Topp, CPA

What to do about homeschool co-op drop outs


There was a discussion on the Facebook group  I Am a Homeschool Group Leader on co-op drop outs. Lots of leaders shared advice.

How do you handle teachers/parents leaving our homeschool co-op mid-session? We have had a few drop outs and it causes serious stress and scrambling for me. We are free except supply fees, but all parents are required to teach or assist (in a class of their choosing). I am almost thinking we need a ‘punishment’ in place for dropping out.
I don’t know what to do right now. I hate to charge fees but I’m thinking now that is why a lot of co-op’s do…….you value something more if you pay for it.


Amanda says: We have a similar problem with folks registering for free field trips and not showing up, which often upsets the staff of the field trip location. We have decided to charge $10 per family for the free field trips and refund it 100% to every family who actually attends. If someone does not attend, their money will be donated to a local charity. Perhaps some variation of this approach might work for your situation.

Georgi says: We now have a teacher agreement that teachers have to sign when they decide to teach, indicating their commitment for the entire year. We still have had a few leave, but I think it has helped people really think through their decisions before making that commitment. We try to spell it out so people realize how much of an affect it has on everyone in the group. If someone does have to leave for some reason, the teacher has to contact each parent and refund their money even if she’s purchased supplies. We have had one person leave mid-year, but fortunately, another mom was willing to pick up the class. The teacher was required to give the new teacher half the class fees.

We allow each teacher to charge their own fee for classes, and recommend that each charge at least $1.00 a class. This helps parents not flake out and not attend classes. It’s hard to have some classes (like gym) if parents don’t bother to show up. We found that charging even a little cut down on that. Your last thought is exactly right – you value something more if you have to pay for it. We also are not a drop off – parents have to volunteer, and the amount of time depends on how long they are there. Usually 2-3 hours if they are there all day. Oh, and each family takes a turn cleaning the church at the end of the day (4 weeks a year).

I’m sorry you are so discouraged, but I understand and have been there. And remember – you can’t be all things to all people, and you can’t teach everything. If others don’t step up to fill in the openings, those classes might have to be dropped. I guarantee people will be more apt to teach next year if they have to do without this year. Doesn’t make this year easier, though. Hang in there!

Melissa says: We charge a $10 per student non-refundable fee. This covers insurance and any other “general” expenses for our Class Day. Then, we charge class fees according to what the teacher needs for the individual classes. We have had a few that ended up moving mid session. We live in a military town, but we usually have someone else take over the class. I think the suggestion for an agreement for the teacher to sign might be a good idea for you guys till you get the point across over the next couple of sessions that if you sign up to teach, you better stay! You can see our documents for how we operate our classes here: It actually has all of our rules and everything if you keep scrolling through the applications. Maybe there will be something of help to you in there.

Roseanne says: We have a put a commitment fee of $100 in place. If the member does all she is required, she can get it back at the end of the year or roll it over into next year. We also have a family or individual member fee and some classes have an extra class supplies/book fee as well. Please know that these growing pains will work out.

We interview new families wanting to join our co-op so we can get to know them and they us. We also make sure they are fully aware of their responsibilities during the interview process. After we accept them (we’ve only had to “reject” 1-2 families but allowed them as individuals), they can choose to come or not.
Also we have a mandatory business meeting the Thurs. evening before our first week of class. We go over all the things that everyone should already know and any new policies that the board has put in place. The more we put things in front of members, the better our days go.

Our general rule of thumb for the new members is to staff our nursery/preschool/kdg. areas so they can take the first year to get used to the way our co-op runs before they teach a class. There have been the rare exceptions.
We charge a late fee for being late to a first period class three times in a row. Some families pay these on a regular basis.

Jennifer says: This wouldn’t apply if you’re brand new (we were two years ago) but we like for our members to be active in the Co-op for at least a semester before offering to teach. With some, I can tell they are committed. With others, I have had to gently tell them to hold off on teaching. You can usually tell after one semester how a family will be about commitment, being on time (don’t get me started), not staying home “just because”, etc. If you’re brand new, it’s a different story. We were begging for teachers at the first meeting and thought we wouldn’t get enough. It has always worked our somehow. Some do back out before sign- ups, but I’d much rather they do it then than mid semester, and give us time to get a replacement class. We don’t have a signed commitment, but our teachers know they are committing for the semester.

Isn’t that great advice? If you’d like advice like this, you can join us at I Am a Homeschool Group Leader on Facebook.

Carol Topp, CPA


Teach teenagers about money: Dollars and Sense Show # 10


In this episode of the  Dollars and Sense Show host Carol Topp discusses teaching your teenagers about money.

Listen to the show here 

Show notes:

Recap: Our motivation to be teaching kids about money:
Other people’s bad examples are all around us, including the US government.
Avoid excessive debt. College debt now exceeds credit card debt.
Someone is watching!
Avoid boomerang kids. We are raising adults, not children

How to Teach
Natural style. As you go about your day. Real life examples.
Get someone else: Sunday school, Scouts, Homeschool co-op
Focused teaching: Family nights, games, books

What to Teach: Teenagers

  • What things cost and what jobs earn.
  • Career exploration. Post high school education.
  • Checking accounts and financial software (Ace Money Lite is free)
  • Budgets. One teenager is given $150/month in allowance, but she has to buy everything: clothes and gas.
  • Avoid credit card debt (but start building credit history in college)
  • Student loan debt. With her dad out of work, a college student chose a  state school when show the debt she would have.
  • Taxes and federal spending
  • Entrepreneurship. Micro Business for Teens. Ethan pays his own cell phone bill. Linnea pays her way to China.
  • Investing. Stock Market simulation.

Career Exploration article Pursuing Their Dreams: Career Exploration for High School Students

Schoolhouse Teachers offers my Career Exploration 8 week class

Free! National Endowment Financial Education (NEFE) High School Financial Planning Curriculum

Generation Change for youth groups and Foundations in Personal Finance for schools at

Discovering God’s Way of Handling Money from 10 weeks , individual or class
Money Matters for Teens Ages 15-18 Edition by Larry Burkett (oldie but still available on

Micro Business For Teens books at

Starting a Micro Business television show on YouTube

Our federal budget graphically displayed at

Tax return simulations from the IRS at Understanding Taxes


Tune in for the next Dollars and Sense show on February 27, 2014 when I will discuss tax breaks for homeschoolers.

Carol Topp, CPA


5 most important, do-able tasks for homeschool nonprofit groups


Blue Avocado asked CPA Carl Ho, who works with dozens of small nonprofits, what would be the five most important, most do-able controls for small groups:

Hint: When CPAs talk about “controls”, we mean the practices and policies that will help your organization avoid fraud and catch mistakes.

1. The first and most important consideration is to set the control environment, that is, to let everyone know, from the top down, that there are policies in place and everyone has to follow the policies. In so many organizations the top person makes exceptions for himself or herself about policies, which sets a sloppy or even unethical tone. Then other people don’t think they have to follow procedures, either, and they start cutting corners. Emphasize the importance of ethics and controls at staff meetings, and demonstrate that everyone follows the rules, all the time.

2. Define clearly who is responsible for what. It’s very common in small organizations, where not as much needs to be written down, for people to say, “I thought she was going to check the invoice.” For example, with invoices: who is responsible for checking the math? Who is responsible for approving the invoice to be paid?

3. Physical controls. Lock it up. Computers should be locked to desks, and they should be protected with passwords. Put checks in a locked drawer. Among other abuses, there are too many cases where someone comes in and takes checks from the middle of the checkbook.

4. If there’s cash involved — such as at a fundraiser or box office at a performance — have two people count all the cash together.

5. Reconciling the bank statement is a very crucial step. It’s very unlikely that someone is going to steal from you and run away forever. Reconciling the bank statement means that embezzlement can’t go on for very long.

Ideally someone other than the bookkeeper (or whoever handles the money) reconciles the bank account from an unopened statement. That’s a strong check on the person who handles the money. But in a small nonprofit there may not be a bookkeeper, and there may be only one person who does everything. In these instances someone else, such as a board member, should receive the unopened bank statement, and look it over before giving it to the bookkeeper or the sole staff person.

 Read the full article here

Cover Money Mgmt HS OrgWant some advice specific to homeschool groups?

You can find it in my new book, Money Management in a Homeschool Organization.

I devote a chapter to the practices that will help homeschool groups prevent fraud and catch mistakes (what we accountants call internal controls)


Carol Topp, CPA

Do you have to file to be tax exempt every year?

Once you file a support group as a 501(c)(7) social club, does the group have to file this exempt paperwork every year?
Susan R
An organization applies only ONCE for tax exempt status.
But, tax exempt organizations must file an annual reporting of their continued existence, Form 990/990EZ or the online 990N every year with the IRS.
It’s a little like passing your drivers license test once, but you must renew your license every couple of years.
Most homeschool organizations file the online 990N and not the longer 990/990EZ because their annual gross income is under $50,000.
If you fail to file the 990/990EZ/990N for three consecutive years, your group’s tax exempt status is automatically revoked! Then you may end up owing taxes. :(
Additionally, some states require annual filings as well. Visit Hurwit and Associates to see what your annual filing requirements in your state might be. Pick your state in the drop down menu on the right sidebar.
I hope that helps!
Carol Topp, CPA

Teach pre-teens about money: Dollars and Sense Show # 9


In this episode of the  Dollars and Sense Show host Carol Topp discusses teaching your pre-teens about money.

Listen to the show here 

Show notes:

Recap: Our motivation to be teaching kids about money:
Other people’s bad examples are all around us, including the US government.
Avoid excessive debt. College debt now exceeds credit card debt.
Someone is watching!
Avoid boomerang kids. We are raising adults, not children

How to Teach
Natural style. As you go about your day. Real life examples.
Get someone else: Sunday school, Scouts, Homeschool co-op
Focused teaching: Family nights, games, books

What to Teach: Pre-teens

  • Allowance. Not always in cash. Try a clothing allowance
  • Savings Account. Power of compound interest. Match their savings.
  • What things cost. Houses, cars, pets, clothes, etc. Explain sales tax.
  • What people earn. Occupations.
  • Start earning money. Extra chores around the house or for family and neighbors. Really motivated kids should read Micro Business for Teens


Boy Scouts, American Heritage Girls money badges
The Secret of Handling Money God’s Way from Ages 8-12. 12 lessons. individual or class
Money Matters for Teens Age 11-14 Edition by Larry Burkett (oldie but still available)

Career Exploration article Pursuing Their Dreams: Career Exploration for High School Students
Schoolhouse Teachers offers my Career Exploration 8 week class
Micro Business for Teens
Starting a Micro Business television program on YouTube

Kids can play popular online money management games such as Road Trip to Savings, Financial Football, Peter Pig’s Money counter, Money Metropolis, Financial Soccer, Record shop tycoon, Burger Restaurant

 I’m not familiar with these games, so if you have an opinion for or against, please drop a note in the comments.

Tune in for the next Dollars and Sense show on February 13, 2014 when I will discuss teaching your teenager about managing money.

Carol Topp, CPA


Homeschool group offering field trips is lost and confused!

Boys on field trip
We offer field trips, parties, meetups, and classes to homeschoolers.  Each person pays us the fee for the field trip or class, and we pay the venue.  We do not charge membership fees.  Most of our income comes from the chaperone tickets.
I am so lost.  When I took over this business, my predecessor told me that I did not need to file any paperwork at all.  I think I was supposed to file a postcard.  We “grossed” under $10K every year, but more than $5k.  I guess my goal is to be in compliance with any laws.



Thank you for contacting me.

I looked at your website and I am amazed at the creative things that homeschool parents come up with to help others!  Neat stuff! :-)

Now it’s up to me to try and figure out where you fit into the IRS nonprofit  structure.

Your group might be classified as a social club.
See this article and chart on how the IRS defines a social club.

The advantage of a social club is that you do not have to apply for tax exempt status with the IRS. Social clubs can “self declare” their tax exempt status. Your previous leader was correct there, even if she didn’t know why!

The IRS does ask that all tax exempt organizations file the Form 990N, ePostcard, annually.
Carol Topp, CPA

Teach kids about money: Dollars and Sense Show # 8


In this episode of the  Dollars and Sense Show host Carol Topp discusses teaching your elementary age kids about money

Listen to the show here 

Show notes:

Our motivation to be teaching kids about money:
Someone is watching!
Avoid boomerang kids
We are raising adults, not children
Other people’s bad examples are all around us, including the US government.
Avoid excessive debt. College debt now exceeds credit card debt.

How to Teach
Natural style
Deut 6:6-7enThese commandments that I give you today are to be upon your hearts. Impress them on your children. Talk about them when you sit at home and when you walk along the road, when you lie down and when you get up.

Get someone else: Sunday school, Scouts, Homeschool co-op
Focused teaching: Family nights, Games, Book work

What to Teach: Elementary kids

  • Divisions of Money:Give, Save, Spend. Bank with three compartments
  • Money is limited. They must make choices.
  • Delayed Gratification.
  • Plan ahead. Create a shopping list. Plan a dinner. Start an allowance. Have them save for a goal.
  • Respect things. Furniture, other people’s items, pick up their clothes, don’t lose your calculator



Family Times Virtue Pack (songs, meal time cards, bedtime stories, etc) from
ABC’s of Handling Money God’s Way
Money Matters: Family Night Tool Chest by Jim Weidmann
Junior’s Adventures and more from Dave Ramsey
Books by John Rosemond


Tune in for the next Dollars and Sense show on January 30, 2014 when Carol will discuss teaching your pre-teens about managing money.



IRS approves tax exempt status for another homeschool group!


Congratulations to Blount Home Education Association in TN on receiving 501c3 tax exempt status from the IRS.

Blount applied in September 2013 and received their determination letter from the IRS on January 2, 2014.About 3 1/2 months. That’s not too bad considering the IRS was shut down for 16 days during that time.

Happy New Year Blount Home Education Association!


If you need assistance in applying for tax exempt status withe IRS, please contact Carol Topp, CPA for assistance.

Read about Carol’s services here.