3 Important Things to Remember About Homeschool Co-ops (video)

If you’re in a homeschool co-op or leading one, I have some advice for you! (I even write a book about homeschool co-ops!).

Here’s a video clip from my recent presentation of Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into given at the Midwest Great Homeschool Convention in 2014.

Part 4 is titled 3 Important Things to Remember About Homeschool Co-ops.

 

In the video I mentioned my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

I also created this handout for the presentation.

Watch the other portions of the presentation on HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

Do You Know About IRS Required Filings for Homeschool Groups?

IRS-Building1

 

Homeschool leaders frequently wonder, “Is my group supposed to be paying taxes to the IRS?” They ask if there is anything they should be reporting to the IRS, if so what and when.

Homeschool Contact With The IRS
There are several situations when a homeschool organization will be in contact with the IRS:

1. Your homeschool group opens a checking account and needs a tax identification number.

Usually, the first contact a homeschool organization has with the IRS is getting an Employer Identification Number (EIN). Most banks now request an EIN when a group opens a checking account. An EIN is similar to a Social Security Number for a business or nonprofit organization. They are available from the IRS at no charge at www.IRS.gov. Search for Form SS-4, the application for an EIN.

2. Your homeschool group pays a worker.

Your worker may be an independent contractor or an employee. Either way, there are forms to file with the IRS at the end of the calendar year (typically a 1099MISC or W-2, respectively). Additionally, there are employer taxes, such as Social Security or Medicare taxes, to pay in addition to employee wages. My books Paying Workers in a Homeschool Organization and Money Management in a Homeschool Organization will walk you through the details of hiring and paying workers.

3. Your group makes money from fund raisers, selling T-shirts and other merchandise, or selling advertising on your website.

Homeschool groups often make money from activities not related to homeschooling. The IRS calls income from these activities “unrelated business income (UBI)” and will tax the profit from these activities. Usually homeschool groups avoid the UBI tax by using one of the IRS exemptions which include using all volunteer labor, selling donated merchandise or having unrelated business income of less than $1,000 annually.

4. Your homeschool co-op brings in income of more than $5,000 in a year.

If your co-op’s gross revenues are more than $5,000 a year, your organization should file an application (Form 1023 or the new, shorter Form 1023-EZ) with the IRS for 501(c)(3) tax exempt status. Approval of tax exempt status by the IRS means that your co-op will not pay income tax on its financial surplus. Your organization is also eligible to receive tax deductible donations and may participate in fundraisers only open to 501(c)(3) organizations, such as Box Tops for Education.

If your organization’s gross revenues are under $5,000 a year, you are granted an exception from filing the application paperwork for 501(c)(3) status. You can “self-declare” your tax exempt status without applying. But you will still have annual reporting requirements, the Form 990N (see below).

5. Your homeschool support group wishes to avoid taxes on their surplus.

If your homeschool organization is a support group, then you may be eligible for tax exempt status as a 501(c)(7) social club with the IRS. Social clubs can “self-declare” tax exempt status but some file an application (Form 1024) with the IRS. Read more about eligibility for 501(c)(7) social club status at HomeschoolCPA.com/SocialClub. Even if you self-declare tax exempt status for your support group, the IRS still requires an annual report (see below).

New IRS Filing Requirement for All Nonprofit Organizations

As of 2006, the IRS requires all nonprofit organizations (except churches) to begin filing an annual information return called a Form 990/990EZ or 990N, even if they have not yet applied for tax exempt status or are eligible to self-declare tax exempt status. The short, online Form 990N is for nonprofit organizations with annual gross revenues under $50,000. It is a very simple online form with only six questions. No financial information is given.

A. Calendar year or tax year dates
B. Check if gross revenue is $50,000 or less
C. Name and address of the organization
D. Employer Identification Number (EIN)
E. Website
F. One officer’s name and address

The Form 990N is filed online at Epostcard.form990.org and is due due 4 1/2 months after the end of your fiscal year (May 15 for groups that run on a calendar year).

Your organization may have difficulty in filing the Form 990N if you have not applied for tax exempt status. You will have to call the IRS Customer Account Services at 1-877-829-5500 and ask to be added to their exempt organizations database so you can begin filing the Form 990Ns. It typically takes 6 weeks to be added to the IRS database.

 

What Happens if Your Organization Doesn’t File the Form 990N?

There is no financial penalty for late filing, but failure to file the Form 990N for three consecutive years means automatic revocation of tax exempt status. Lately, I have helped several homeschool organizations that did not file their 990Ns for several years (most did not know about the requirement) and had their tax exempt status automatically revoked.

If all this seems confusing or overwhelming, please visit HomeschoolCPA.com. On the blog page, type “990N” into the search box and read the blog posts about this IRS filing requirement.  Additionally, my book The IRS and Your Homeschool Organization can give you details on applying for tax exempt status.

 

Carol Topp, CPA is an author, accountant and retired homeschool mom. She is the author of Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out, The IRS and Your Homeschool Organization and Money Management in a Homeschool Organization: A Guide for Treasurers. She shares her experience as a CPA, homeschool mom and co-op treasurer in her books, at homeschool conventions and on her podcast DollarsAndSenseShow.com. Carol offers consulting services to homeschool leaders. Contact her on her website HomeschooCPA.com.

 

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Tips for starting a homeschool co-op (video)

Ever thought about starting a homeschool co-ops? I’ve got a book that will help!

Here’s a clip from my recent presentation of Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into given at the Midwest Great Homeschool Convention in 2014.

Part 3 is titled Tips for Starting a Homeschool Co-op

 

In the video I mentioned my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

I also created this handout for the presentation.

Watch the other portions of the presentation on HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

Preventing child abuse in your homeschool group

Hello Carol,

Thank you so much for all the insight you have offered! I am looking for information on background checks, and creating abuse prevention policy in our homeschool co-op. I have found vague info on how to protect children, but I am looking for written policy to implement. Could you please share with me any resources on this topic you may have.
Thank you for all your time,
Heather K.
Heather,
Thank you for your kind words. I’m glad the website was helpful.

I usually recommend homeschool leaders contact a large, local church and speak with the children’s director. They will have lots of information on background checks and policies. They may even share their policy with you.

National Center for Life and Liberty (NCLL) offers a short ebook “Preventing Child Abuse in Your Ministry” by Attorney David Gibbs III. You can download it for free (after giving, name, email, address and phone number) at http://www.ncll.org/resources/free/2014/august . It was quite good and offered general guidelines of what to have in a child abuse prevention policy, but it does not have a sample policy.
You might also join this Facebook group I belong to and ask your question there:
I Am a Homeschool Group Leader https://www.facebook.com/groups/72534255742/
I hope that helps,
Carol Topp, CPA

The Disadvantages of Homeschool Co-ops (video)

I love and encourage homeschool co-ops (I even write a book about them!), but, like marriage, it’s best if you know the disadvantages of joining a homeschool co-op.

Here’s a clip from my recent presentation of Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into given at the Midwest Great Homeschool Convention in 2014.

Part 2 is titled The Disadvantages of Homeschool Co-ops

 

In the video I mentioned my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

I also created this handout for the presentation.

Watch the other portions of the presentation on HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

Church is worried about legal status of homeschool group

Photo credit http://webesteenphoto.blogspot.com

The leadership of our church is concerned that our homeschool  co-op does not have any legal status. They suggested that we look into becoming something official, like a 501c3.

The issue is that we are a pretty small group, and the teachers are not paid by the co-op, but by the individual students directly. At this point, there really isn’t any money changing hands. I have a lot of reservations about the 501c3 status, too.

Is there another “legal entity” that our smallish co-op could become that would let us do some basic things like have a checking account? We don’t really have any money to put toward legal fees or anything like that, so it would have to be very inexpensive to set up.

Thanks so much for all your work.

Kerry in Ohio

 

Kerry,

It’s nicest if the church takes you under their tax exempt status as a ministry, but for legal and insurance purposes a lot of churches are reluctant to do that.

Two choices

There are really two legal structures you group can be: nonprofit or for-profit. Most homeschool groups are nonprofits and in addition have tax exempt status from the IRS.

If your gross annual income is under $5,000 per year, you do not have to file any application to be tax exempt with the IRS; you can simply self declare your 501c3 tax exempt status. That’s pretty easy!

You will have to file an annual information return with the IRS called a Form 990-N, but it’s quick and easy. See my 990-N FAQ page here: http://homeschoolcpa.com/irs-form-990n-faq/

If you do not self declare 501c3 status (and file the annual 990-N), then, by default, your organization is a for-profit business. That’s your other legal alternative. The income and expenses would have to be reported on someone’s tax return as a business. The church may not rent space to a for-profit business (my church won’t), so you should read more about nonprofit and 501c3 status.

IRS and Your Homeschool Org cover

My book The IRS and Your Homeschool Organization can calm many of your fears.

I hope that helps.

Carol Topp, CPA

5 advantages of homeschool co-ops (video)

I have a series of 7 videos from my recent presentation of

Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into

given at the Midwest Great Homeschool Convention in 2014.

Part 1 is titled 5 Advantages of Homeschool Co-ops

 

 

In the video I mentioned my book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

I also created this handout for the presentation.

Watch the other portions of the presentation on HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

Error in the IRS and Your Homeschool Organization book

This is embarrassing to admit, but I found an error in my book, The IRS and Your Homeschool Organization.

IRS and Your Homeschool Org cover

 

The error is on page 23 in the chart Comparison of 501(c)(3)  Qualified Charity and 501(c)(7) Social Club.

The correct chart is available here.

The error is under the column for 501(c)(7) and the row Annual IRS reporting. It should read “Form 990N, Form 990EZ or Form 990.” All tax exempt organizations including 501(c)(7) Social Clubs are required by the IRS to file an annual Form 990, 990EZ or 990N.

Please make this correction in your book.

I apologize for the error and will make a correction to the book as soon as possible.

Carol Topp, CPA

September 5, 2014

Update September 15, 2014: The error in the print version and pdf version have been fixed. The Kindle version will be fixed soon. While I was at it I updated some other information and added a chapter on getting tax exempt status reinstated if it was revoked. This update is the 2nd edition of the book.

 

Is a homeschool tutor an employee of the family who hires her?

Teenager&Teacher

I am hoping you can help me. I recently got hired as a homeschool teacher. I am reading articles that say I am not an independent contractor and this is really concerning me. I am hearing that I am an employee and to do things legally my employer has to fill out all this paperwork.

I want to be legal, but I don’t want to burden my new employer with all of this.

She did give me materials, an hourly wage and the times she wants me to come over.
Thanks,
Stephanie

Stephanie,

Thank you for contacting me. Worker status as an employee or independent contractor is a difficult and confusing issue.

What the IRS says about worker status
The IRS says that the facts and circumstances of each situation determines the worker status, not our desire to avoid paperwork and taxes(!). But they are the IRS, so of course they will say things like that!

What to do as a independent contractor
In practice, you and the family who hired you need to have a common understanding of your employment situation. If you agree to be an IC, then make sure you act like one. Have a written agreement stating you agree to do a certain job for a certain amount of pay. Both parties should sign it. Invoice the family on a regular basis listing the times and hours you worked for them. Make sure the family does not tell you how to do your job; you should already know how to do your job. You should also bring your own tools and supplies, although the student can have their own school supplies and books as well.

I think it is also fairly typical for private tutors to be ICs rather than employees. You are much like a piano teacher who agrees to go to a family’s home to teach. The IRS has a tendency to look at industry practice when determining worker status.

You cannot avoid some paperwork
Make sure the family gives you a 1099MISC and you report the income on your taxes at the end of 2014. You should also fill out a W-9 form Request for Taxpayer Identification Number and give it to them, so they have your legal name and SSN.

All these practices will help confirm your worker status as an IC, rather than an an employee.

I hope that helps.

Carol Topp, CPA
HomeschoolCPA.com

Homeschool co-op has a super volunteer. Can she be paid?

SuperMom Cartoon

Hi Carol,

Our co-op is a nonprofit corporation. Almost all of our tutors in the co-op are moms with kids in the program. The moms do not get pay in money for teaching but are offered “credits” against tuition.

1) Are we correct to assume that we are not dealing with either Independent Contractors (IC) or employees in this circumstance?

2) We have one tutor who gets “credits” and payment. Can we regard her as an IC if she submit an invoice?

We do have a few tutors whom we pay and we will need to look more closely into invoices and 1099 MISC.

Thank you so much for your advice. If these questions are covered in your ebook, please let me know.

-MG

 

Dear MG,

Thank you for contacting me. Let’s see if I can answer your questions.

1. Sounds like your tutors are volunteers. You thank them with tuition discounts (or “credits” as you call them). The more a person volunteers, the larger the discount/credit. There is no problem with doing that.

Paying a Volunteer

2. Paying a volunteer gets very tricky. She’s no longer a volunteer because she is paid. She’s actually a mix; some volunteer and some paid. That’s what’s confusing. If you can clearly separate her volunteering and the discounts/credits from her paid tasks, then do that. For example, if she tutors and gets credits and then in addition designs your website for pay, it’s pretty easy to separate those two jobs.

Super volunteers

But some people are what I call “super volunteers.” They volunteer so much beyond their discounts or credits that the organization pays them for their extra volunteering. But volunteers cannot get paid, so she’s either an employee or an IC. If you want to treat her like an IC, then she cannot receive benefits like tuition credits. Bummer.  Employees can receive benefits like tuition credits, but not ICs.
I discuss this in Money Management in a Homeschool Organization. See Chapter 12.

Cover Money Mgmt HS Org

The Money Management book will be helpful and so will my Paying Workers in a Homeschool Organization ebook, because it shows the forms needed for ICs.

 

Carol Topp, CPA