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

Summer reading for homeschool leaders: Homeschool Co-ops

 

This summer, I’ll be featuring one of my books for homeschool leaders every few weeks (and offering special discounts!). I’m also updating one of my books this summer…can you guess which one?

I’ll start with my first book for homeschool leaders,

I published this book in 2008 with a different cover. In 2013 I updated it and chose a new cover.
HomeschoolCo-opsCover

Original cover

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Updated cover

This book will help homeschool leaders start and run a homeschool co-op.

It has chapters on:

Part One: Starting a Homeschool Co-op
Chapter One: Benefits of Co-ops
Chapter Two: Disadvantages of Co-ops
Chapter Three: Different Types of Co-ops
Chapter Four: Your First Planning Meeting
Chapter Five: What’s in a Name? Names, Missions

Part Two: Running a Homeschool Co-op
Chapter Six: Leadership
Chapter Seven: Co-op Offerings
Chapter Eight: Money Management
Chapter Nine: Managing Volunteers and Conflict
Chapter Ten: Ready for the Next Step? 501c3 Tax Exempt Status

Part Three: Not Burning Out
Chapter Eleven: Avoiding Burn out

Read a sample chapter

Read more about Homeschool Co-ops the book


Here’s a special for the summer. Buy Homeschool Co-ops at 25% off. Get the paperback version for $7.50 (usual price $9.95) or ebook version for $3.99 (usual price is $4.95).


Order Homeschool Co-ops in paperback

Order Homeschool Co-ops in ebook Kindle  or pdf

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Trends in accounting can help homeschool leaders

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I recently read an article from CPA Practice Advisor about trends in accounting. The author mentioned 3 trends and  I think all 3 can be beneficial to homeschool leaders.

  • The rise of cloud accounting. No more are the days of emailing spreadsheets back and forth, finding errors and inconsistencies, and being reliant on a desktop accounting system.
  • The focus is on helping small and mid-sized businesses. Accountancy firms have begun to provide advisory services, not just tax and compliance.
  • Advances in technology have increased efficiency. Many solutions available now that simplify and expedite so many processes in accounting firms.

I was pleasantly surprised that I am quite trendy!

  • I encourage my nonprofit clients to consider online accounting programs like Quickbooks Online or WaveApps.com. These programs allow several people (including me) to remotely access the financial data for your group. That’s good for accountability and shared workload!
  • I focus on small nonprofit organizations. And I provide consultations, not just filings IRS forms (although that is very important to do!). This focus helps me be an expert on nonprofits, taxes, and homeschooling-a unique combination!
  • I’m using technology to improve efficiency. Many of you who schedule phone consultations use my online scheduling service, Time Trade. My latest new tool  such as online project management called Quire. These tools help me keep on track as a I handle a larger load of clients each year. They also help the homeschool leaders know what information I need from them and the steps they need to follow in getting (or keeping) tax exempt status.

 


I’m always looking for ways to improve my services to you my clients.

If you’d like to be part of my advisory team and give me your input on my products and services, join the Facebook group or the email list. More details here.


 

Carol Topp, CPA

Can a homeschool group just get together without having to report to the IRS?

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Can a homeschool group just get together without having to report to the IRS?

Dorothy

 

Ddorothy,

Yes, a group of homeschool families can just gather together, but the group will be limited in their size and to dealing in cash only.

Very small homeschool groups are more like a play group or group of friends pooling their money to pay group expenses, like a field trip.

I compare it to a group of friends all going out to dinner. They each pitch in to pay the bill. These tiny groups do not file reports with the IRS. Very tiny homeschool groups can operate like this.

In this case, a group may not need an EIN or to open a checking account for the group, but they would be limited in size and limited to cash only. It’s usually when a group needs a checking account that they have dealings with the IRS, because they need an EIN to open a checking account.

I hope that helps,

Carol Topp, CPA

Trouble filing your 990-N?

Having Trouble Filing 990-Ns?

Some non-profit organizations have reported trouble trying to file the 990-N ePostcard using the new IRS system.

If you’re using Google Chrome or Firefox, try using Internet Explorer (IE) to see if that helps.  I know that IE is old-fashioned, but it seems to work.

By the way, if your organization operates on a calendar year (with your year ending December 31), then you Form 990-N is typically due May 15. Since May 15 is a Sunday the IRS has extended the due date for the 990-N to Monday, May 16, 2016.

 

Carol Topp, CPA

 

Give me your opinion!

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I like it when people ask my opinion. How about you?
Well, I’m asking your opinion.

I’m forming an advisory team to offer me input on my products, services and website.

If you’ve bought one of my books, used my services, or visited my website, I’d like you to to consider joining my HomeschoolCPA Advisory Team.

It won’t be a big commitment. I know you’re busy. I value your time!

I launched a closed Facebook group where I’ll ask questions, offer surveys and gather your feedback. Additionally, I will send out surveys for those not on Facebook and hold an occasional conference call for you to chat with me about your suggestions.

Here are more details of what I’ve got planned.

If you’re interested in helping me you can:

or
Click here to submit your email.

Thanks for considering sharing your valuable input.

Carol Topp, CPA

Homeschool groups and huge fundraisers can be a bad thing!

Hey Carol –

I have been perusing your site as we are getting ready to start a new homeschool group (breaking off a larger group) in our area. Based on the info I have read, I feel that we identify the most as a 501c7 social group.

We will be offering clubs, fellowship, and field trips as our primary purpose. As a larger homeschool group, we have sold Discount Cards with local businesses/restaurants giving certain discounts to patrons. We sold them for $5 each. This has been a huge fundraiser for the bigger group. One box of cards is $5,000 (not all profit as there is expense from the printing).

My question is if as a new group we could sell these to help with our expenses and if the UBI would be taxable? We definitely want to do things correctly. The sellers would be the members of the group and done voluntarily.

I appreciate any help you can provide. Thanks!

Joyell

Joyell,
Your organization avoids the UBIT tax because the fundraiser is conducted substantially (or in your case, completely) by volunteers.

But you need to be careful that at least 65% of your total income comes from membership dues. Therefore, a maximum of 35% your income can come from fundraisers. Note that this is income, not the net proceeds of your fundraiser.

Something like this:

Your group’s total income = $10,000

Membership dues (this can include field trip income) must be $6,5000 or more (at least 65% of total income)
Fundraiser income cannot be more than $3,500 (max of 35% of total income)

One of the problems with this type of fundraiser is that it brings in so much income (and of course has substantial expenses as well), it can that it can jeopardize your 501(c)(7) tax exempt status because the fundraiser income exceeds 35% of total income.

This may mean that you are no longer tax exempt and will owe taxes on your surplus each year.

IOW, the IRS requires 501(c)(7) social clubs organizations to get most of their funds from members and not from selling products or other fundraisers.

I hope that helps.

Carol Topp CPA

Homeschool group not open to the public. Is that allowed?

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On your chart comparing the two types of tax-exempt status for homeschool organizations, under 501(c)(3),  it says membership is open to the public. However, many homeschool groups have membership qualifications. Some require members agree with a Statement of Faith or or not participate in a public-school-at-home program.
Thanks for your insights.

Dorothy

Dorothy,
You asked about membership in your homeschool group being open to the public. You do not have to throw open the doors to your homeschool programs and let everyone in. That could be logistically difficult and it could threaten the safety of the children participating in your programs.

I should clarify that 501c3 groups serve a public good-the education of children- but they may limit membership to their group.

Also, when the IRS determines a group is a public charity (and educational organizations are considered public charities), they mean the organization is funded by the public, unlike a private foundation which is funded by an individual or a family.

Remember, we, as Americans, have the freedom to assemble and that means we can determine who can join our groups and who cannot join. So membership requirements are allowed.

Sorry if that was not more clear.

Carol Topp, CPA

How you pay your homeschool teachers could affect the property tax exemption for your host church

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Several homeschool leaders have recently learned that the way that their homeschool groups are compensating the teachers (parents paying teachers directly) jeopardizes the property tax exemption of their host churches.

The problem

Some state laws limit churches renting their building for business purposes to only a few days a year.
One homeschool program was arranging for teachers to conduct classes for homeschooled children each week for about 30 weeks of the year. Each teacher was paid by the parents, so each teacher was essentially a business owner. That meant the church exceeded the state-set limit on business activities.

This situation can put a church’s property tax exemption in jeopardy. If the church ceased hosting the homeschool program, , it could mean the end of many homeschool programs hosted in churches.

What can a homeschool group do?

I read about these state laws and the church’s limits on business activities. The reason co-op classes jeopardize a church’s property tax exemption is because the class teacher was a business and exceeded the state limit on days a church can host for-profit businesses in its building.

 

I recommended that homeschool organizations in this situation begin collecting the money from the parents and pay the teachers as employees or independent contractors hired by the homeschool group. Many homeschool organizations are 501c3 educational nonprofits. The state laws usually allows a church to rent space to a nonprofit if they have a charitable, educational or religious purpose.

 

It’s more work for the board to negotiate the payments and for the treasurer to prepare the checks and give 1099MISC or W-2 forms to the teachers, but it keeps the homeschool program running and the church keeps its property tax exemption.

 

Can this happen to my homeschool group?

So here’s some issues for all homeschool leaders who conduct classes in churches to consider:

  • Be aware of the limits on business activities conducted by churches in your state property tax exemption laws.
  • Talk to your host church about this issue. Ask what they know about limits on business activity for churches.
  • If your property tax laws limit your host church, consider changing how your teachers are paid, so that the church is not renting space for business activities to for-profit businesses (i.e., individual teachers)
  • Be sure your activities are in line with the religious and charitable purposes of your host church.

Note that this affects churches’ property tax exemption, not their income tax exemption at the federal or state levels.

I’ll keep an eye on this issue and keep you informed. Sign up for my email list (bottom right corner) to be notified of future blog posts on this issue.

Carol Topp, CPA

Opening another branch of a homeschool co-op

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I am in the process of organizing a co-op. We are actually going through another established co-op and establishing a north branch of the existing co-op. They are already a 501(c)(3) and carry liability insurance so we would be under them. We would be the same program but in our location. However, we would need to raise most of our own funds. Do you see any issues or possible issues with this set-up?

How would we go about keeping our money appointed to the correct branch?
I appreciate any help!
Corrinn

 

Corrinn,

I think your set up sounds great. It’s like a store with two locations. You could set up two separate checking accounts, both using the same EIN (Employer Id Number) from the original (parent) group. Your checking account could say “HOMESCHOOL CO-OP NORTH BRANCH”

Accounting Software

As for accounting software you might consider an online program such as Quickbook Online which lets you set up multiple “locations” or “departments.” I’ve been recommending WaveApps.com (it’s free) but I’m not sure if they can set up multiple locations/departments like you want. Of course you could set up separate Wave accounts since you’ll probably have separate checking accounts.

Transparency

I recommend that the Treasurer of parent organization be a check signer on your checking account and be given access to your bank account and accounting software (that’s why online accounting software would be helpful). You need to be open and transparent to the parent group.

Joint IRS Returns

At the end of your fiscal year all your income and expenses will need to be reported to the parent group so it can be added to their income and expenses on the IRS Annual Form 990 Information Return.

Good luck!

Carol Topp, CPA
HomeschoolCPA.com