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

Congratulations on 501c3 status to another homeschool organization!

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Congratulations to FAITH of NW Houston on receiving 501(c)(3) tax exempt status form the IRS! That was 3 homeschool organizations in the past two weeks.

Renee, one of their leaders wrote,

“Just today I received the acceptance letter from the IRS. We have been approved for 501c3 tax exempt status. Happy dancing in Texas!:) Many thanks for helping us through this tedious task.”

I was happy to help all three of these group become tax exempt and continue serving homeschoolers in Texas, Pennsylvania and Indiana!

 

Do you know the pros and cons of 501(c)(3 status? Do you know what 501(c)(3) status could mean for your homeschool group?

My book The IRS and Your Homeschool Organization could help your group as well.
This 120 page book explains the pros and cons of tax exempt 501(c)(3) status. Is it needed? Is it worth it?

Price: $9.95

Learn more here.

 

Carol Topp, CPA

HomeschoolCPA Carol Topp at 2014 HSLDA National Conference

 

Homeschool School Legal Defense Fund Association (HSLDA) 2014 National Leader Conference will be held in my backyard. Well, not in my real backyard, but awfully close!

The 2014 Conference will be held in Erlanger, Kentucky, only about 30 minutes from my home.

Register here

I am honored that they have invited me as one of their speakers. I will be speaking to homeschool leaders from across the country on:

Who’s Afraid of the Big, Bad IRS? How the IRS Sees Homeschool Organizations

and

Tax Exempt Status for Homeschool Organizations: The Pros and Cons 

 

I hope to meet some of you there! If you cannot attend be sure to tell your state representative to attend one of my sessions and take good notes for you!

Carol Topp, CPA

Congratulations on 501c3 status to two homeschool organizations!

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Congratulations to Claritas Classical Academy in Pennsylvania and Praise Ensembles, Inc in Indiana on receiving 501(c)(3) tax exempt status form the IRS!

I was happy to help both of these group become tax exempt and continue serving homeschoolers in PA and IN!

 

Do you know the pros and cons of 501(c)(3 status? Do you know what 501(c)(3) status could mean for your homeschool group?

My book The IRS and Your Homeschool Organization could help your group as well.
This 120 page book explains the pros and cons of tax exempt 501(c)(3) status. Is it needed? Is it worth it?

Price: $9.95

Learn more here.

 

Carol Topp, CPA

Is your homeschool organization a “mutual benefit” organization? Maybe not!

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Many homeschool organizations file to become nonprofit corporations in their state and they are usually asked:

Are you a mutual benefit corporation?

Well, most homeschool groups benefit their members with mutual support, so the answer is “Yes”, right?

Maybe not.

Most states recognize three types of nonprofit corporations:

  • Mutual Benefit
  • Public Benefit
  • Religious

You pick the type when you file Articles of Incorporation in your state.

 

A mutual benefit  nonprofit corporation provides an association of people with a common benefit. Mutual benefit corporations are formed for common gain purposes such as providing insurance for members (many insurance companies still have “mutual” in their names, such a Mutual of Omaha.) Other examples include social clubs, business leagues, and veterans groups. Homeschool support groups may fit this category.

A public benefit nonprofit corporations is organized for a public, educational or charitable  purposes. Examples of public benefit nonprofit corporations include charities, social service organizations, schools, foundations, and scientific and research organizations. Homeschool co-ops may fit this category.

Religious nonprofit corporations include those organized primarily or exclusively for religious purposes. Examples of religious nonprofit corporations include synagogues, churches and other places of worship.

Only public benefit and religious nonprofit corporations are eligible for 501(c)(3) tax exempt status with the IRS.

Mutual benefit nonprofits may be eligible for other types of IRS tax exempt status such as 501(c)(6) trade associations of 501(c)(7) social clubs.

 

Most homeschool co-ops are public benefit organizations because they serve a public good (i.e. education of children) and are not mutual benefit organizations.

 

Our Articles of Incorporation state we are a mutual benefit corporation. How do I change them?

You will have to amend the Articles of Incorporation. Start researching “amend nonprofit corporation and YOUR STATE”  on the internet. It usually involves holding a board meeting to change the Articles of Incorporation, filing some paperwork with your state and paying a small fee to your state (typically $30-$50).

Need to discuss this more? Contact me, Carol Topp, CPA,  and we can arrange a phone consultation to discuss your homeschool organization.

Should your homeschool group have members? Maybe not!

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Many homeschool organizations file to become nonprofit corporations in their state and they are usually asked

 Does your corporation have members?

 Well, naturally most homeschool groups have members, so the answer is “Yes”, right?

Maybe not.

 

Read the question carefully. It asks if your corporation has members. Your group may have members, but not the corporation.

What’s the difference?

For-profit corporations have shareholders. These shareholders are entitled to a vote on matters brought to their attention. A nonprofit corporation may have members, but is not required to have members. If a nonprofit corporation has members, then those members are entitled to a vote on matters brought to them. Typically, this might be electing board members, approving the budget, choosing  to hire paid staff, etc. (the bylaws usually spell out what members vote on).

Voting memberships are useful when an organization wishes to be democratically controlled by its constituents. Voting memberships structures are commonly used by member driven organizations such as social clubs, churches, chambers of commerce and trade associations. In such cases, the organization exists to serve its members and its makes sense for control to be vested in the members.

Source: http://charitylawyerblog.com/2011/04/26/nonprofit-law-jargon-buster-voting-members-vs-self-perpetuating-boards/

Some nonprofit corporations do not have members; instead decisions are made by the board. The members do not have a vote, nor do they elect board members. The board appoints replacement board members (it’s called self-perpetuating).

Many homeschool organizations may have members participating in their activities (co-op classes, filed trips, clubs, etc), but not have voting members of the corporation. Instead, they have a board that makes the decisions.

Advantages of a board-run organization (i.e., no members of the corporation)

  • A board-run homeschool group does not have to gather members together for a vote.
  • Decisions can be made more quickly.
  • A smaller group of people, the board, makes the decisions

Disadvantages of a board-run organization (i.e., no members of the corporation)

  • No input from the members
  • The board replaces itself and could become insular with no new ideas.

 Should your homeschool nonprofit corporation have members?

Well, of course, that is up to you, but I believe that it is more cumbersome for most homeschool organizations to have voting members. Many homeschool organizations are run by a self-perpetuating board very successfully.

What if your Articles of Incorporation state you have members, but you want to change that?

You will have to amend the Articles of Incorporation. This will probably take a vote of the members. State law dictates who can change the form of the corporation. Start researching “amend nonprofit corporation and YOUR STATE”  It usually involves holding a member meeting to change the Articles of Incorporation, filing some paperwork with your state and paying a small fee to your state (typically $30-$50).

 

Does the EIN become the 501c3 number?

501c3_yellow

Does the EIN become the 501c3 number, meaning are they the same number once the group obtains the 501c3 status?

Also, as a Wisconsin unincorporated nonprofit association, are we required to become a 501c3 or c4?

If not, are we required to file anything with the IRS?
-Becky in WI

Becky,
Thank you for contacting me.
The IRS does not issue a new identification number when an organization receives tax exempt status. There is no “tax exempt number.” Organizations use the same EIN they had before receiving tax exempt status.

No organization is “required” to be a 501c3 or 501c4, but if your organization is not tax exempt under one of the 501c categories, then you owe taxes on your profits.

All nonprofit organizations are required to file an annual 990 (or 990EZ or 990N ) annually with the IRS.

This  FAQ page on the Form 990N may be helpful.

And here’s a video I just made explaining the annual reporting to the IRS: http://homeschoolcpa.com/video-annual-irs-fiings-for-homeschool-organizations/

I hope that helps.

If you need specific guidance, we could set up a consultation by phone. Contact me here.

Carol Topp, CPA

File 990N for prior years

Did you miss filing your IRS Annual report, the Form 990N in prior years?

Here are a few online services that let your file prior year 990Ns.

 

990N Providers

 

Here’s a full list of IRS approved providers for the Form 990N.

Do not use these services for your current Form 990N.

The current Form 990N is filed for no charge at https://epostcard.form990.org/

 

Remember, tax exempt organizations must file the Form 990, 990EZ or 990-N with the IRS every year. Failure to file for 3 consecutive years will mean your tax exempt status will be automatically revoked.

If you believe your tax exempt status was revoked, I can help your organization get reinstated. Contact me.

Carol Topp, CPA

Pinterest board helps homeschool leaders

PinterestBoard
HomeschoolCPA has a Pinterest board called Helps for Homeschool Leaders.

 

On it you’ll find links to

  • blog posts to help you lead your homeschool organizations’
  • podcasts for homeschool leaders
  • inspiring quotes
  • other pins you might find useful.

Check it out, follow me on Pinterest and pin something to your boards too.

Can 501(c)(3)s lobby against legislation?

U.S. Capitol Building

“If we become a 501c3 organization, will that hinder our participation in lobbying against legislation that harms homeschooling?”

-Steve in KY

Lobbying for legislation by 501c3 organizations is allowed but it cannot be “substantial.”

The IRS defines “substantial” as more than 20% of your total expenditures.
Source: http://www.irs.gov/Charities-&-Non-Profits/Measuring-Lobbying-Activity:-Expenditure-Test

Lobbying on behalf of a candidate for office is prohibited for 501c3 organizations.

 

Carol Topp, CPA