5 Ways a Homeschool Co-op Can Benefit Your Child

One of my workshops for the Ultimate Homeschool Expo 2011  is titled

5 Ways a Homeschool Co-op Can Benefit Your Child

Here’s the handout so you can follow along!

5 Ways Co-ops Benefit Handout


Want to learn more about the Ultimate Homeschool Expo, an on-line homeschool convention with 30 speakers and over 100 workshops?

Learn more here.

The UHSE will be live the week of May 2-6, 2011, but until then every Thursday there are live workshops you can join for free.

If you can’t join us live, the workshops are recorded and you can listen on your computer or download to your mp3 player and listen at your leisure. I like to listen as I take my morning walk!

Tickets are $39.95, but on special for only $24.97 for a limited time.

Buy your ticket here

Carol Topp, CPA

Compare 501(c)(3) Charity to 501(c)(7) Social Club

The IRS offers more than a dozen different classifications of tax exempt status.  The most popular by far with 80% of the total is the 501(c)(3) “Qualified charity status.”

Many homeschool organizations may qualify to be 501(c)(3) qualified charities with an educational purpose or 501(c)(7) Social Clubs with a social or recreational purpose.

Here’s a comparison of 501(c)(3) “qualified charity” status and 501(c)(7) Social Club.

In general, homeschool co-ops fall under 501(c)(3) “qualified charity” because they have an educational purpose, while homeschool support groups fall under 501(c)(7) Social Club.

501(c)(3) Qualified Charity 501(c)(7) Social Club
Purpose Religious, Educational, Charitable, Scientific, Literary, Pleasure, recreation, social activities
Examples churches, charities, private schools, homeschool programs with an educational or religious purpose Fraternities, sororities, country clubs, hobby clubs, homeschool support groups
Requirements No private inurement allowed. Upon dissolution all assets must be distributed to another 501(c)(3) organization. Personal contact, fellowship and co-mingling of members. No private inurement allowed.
Activities Can hold programs, sell services and products as part of their exempt purpose. Can provide meals or services only to members in connection with club activities
Tax deductible donations allowed Yes No
Tax exempt (no taxes on profits) Exempt from federal income tax unless the organization has unrelated business income Exempt from federal income tax on income derived from members; other income taxed
Source of Income Membership fees, fees for services, donations, fund raisers, program fees Primarily (65% or more) of the income must come from the membership
Membership Serving the public or the “public good” (i.e. the education of children is a public good) Limited membership and consistent with the purpose of the club
IRS Application Required? Yes, if gross revenues over $5,000/year. File Form 1023 or 1023-EZ No. The IRS does not require 501(c)(7) organizations to file an application. They can “self-proclaim” tax exempt status.
Annual IRS Reporting Form 990-N, Form 990-EZ or Form 990 Form 990-N, Form 990-EZ or Form 990
Legislative Lobbying permitted? Insubstantial lobbying allowed (less than 20% of total expenses). No endorsement of a candidate. No limit on legislative activity as long as it furthers the exempt purpose

IRS and Your Homeschool Org cover

Need more help understanding your tax exempt status?

My book, The IRS and your Homeschool Organization is a good place to start.

If you have specific question about your homeschool program, we can arrange a phone consultation.

I hope that helps!

Carol Topp, CPA


Are Homeschool Support Groups Automatically Tax Exempt?


I help homeschool groups file for tax exempt status with the IRS.

Most of them are homeschool co-ops and want 501(c)(3) status as a “qualified charity” because they have an educational purpose and desire tax deductible donations, tax -free profits and sometimes other perks that come with 501(c)(3) status.

But there is another type of tax exempt status that may apply to homeschool support groups: 501(3)(7) Social Club.

Here’s what it takes to be classified as a 501(c)(7) Social Club:

1. Purpose is for pleasure, social or recreation. A nonprofit motive and no part of the net earnings may inure to the benefit of any person having a personal and private interest in the activities of the organization

There must be an established membership of individuals, personal contacts and fellowship. A commingling of the members must play a  major role in the life of the organization.

Common examples include  college fraternities or sororities, country clubs, garden clubs, hobby clubs, etc.

2. Limited membership: membership is limited and consistent with the character of the club

3. Supported by membership fees. In general, your club should be supported solely by membership fees, dues, and assessments. A section 501(c)(7) organization can receive up to 35% of its gross receipts from sources outside of its membership without losing its tax-exempt status. For example, up to 35% of your total revenues can come from fund raising.

4. Business activities. If your club will engage in business, such as selling products or services, it generally will be denied exemption. However, your organization can provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests.

5. Tax treatment of donations. Donations to social clubs are not deductible as charitable contributions on the donor’s federal income tax return.


These criteria fit a homeschool support group. The members are limited to homeschool parents (or those interested in homeschooling), meet for social reasons, are supported by membership fees (and maybe a little bit of fund raisers), do not sell products or services and do not collect tax deductible donations.

So most homeschool support groups can be considered 501(c)(7) Social Clubs.

Most homeschool co-ops do not fit this description because they sell services (classes) and have an educational purpose, not a social or recreational purpose. They may qualify for 501(c)(3) tax exempt status as an educational organization.

Confused about whether your organization is a 501(c)(3) “qualified charity” or 501(c)(7) Social Club?

This chart may help: Compare 501c3 to_501c7

Here’s the good news: If your organization fits the bill to be a 501(c)(7) Social Club, you do not have to file the IRS application (Form 1023 or 1024) like 501(c)(3) organizations must. 501(c)(7)s  are allowed to “self-proclaim” their tax exempt status.

Here’s the bad news: The IRS requires all tax exempt organizations for file an annual information return , Form 990/990EZ or 990N.  Failure to file the Form 990/990EZ/990N for 3 consecutive years means your tax exempt status is automatically revoked. Need help getting your tax exempt status reinstated? I can help.

Carol Topp, CPA

Video: Homeschool and Taxes

The Homeschool Channel TV has a short video explaining tax breaks for homeschoolers.

You may need to register as a member of Homeschool Channel. It’s free and an excellent resource of videos for your family.

View Homeschool Channel TV: Homeschool and Taxes here


Jeremy and Steve discuss 501c3 charitable status.

I have an article on my blog that answers the question:

Can my family homeschool be a nonprofit charity?

Carol Topp, CPA

Can’t we operate without IRS tax exempt status?



Does my homeschool support group really need to apply to 501(c)(3) tax exempt status with the IRS? It seems like a lot of time and money. We have a small budget and we don’t accept tax deductible donations.

Can’t we just operate as we are?

You described your group as a support group, meaning you exists for the benefit of the members and you do not accept or plan to seek tax deductible donations.

Many larger homeschool organizations, especially co-ops that have an educational function and not just a support group purpose, seek 501(c)(3) tax exempt status for its many benefits:

  • tax exemption
  • ability to accept tax deductible donations
  • ability to participate in fund raisers only open to 501(c)(3) charities

See my article Do we need 501c3 status?

But homeschool support groups are different. They don’t hold classes; they focus on fellowship. Support groups don’t accept donations; they get all their income from membership dues and maybe a little bit of fund raising.

I attended an IRS webinar and asked your question. Here’s what the IRS said:

It is true the Tax Reform Act of 1969 requirement to “give notice,” (to apply for recognition of tax-exempt status) applies only to organizations wanting section 501(c)(3) status.
So, although other types of organizations are not required to file Form 1024, they may still wish to do so in order to receive a determination letter of IRS recognition of their status. Having the determination letter ensures public recognition of their status and may enable exemption from some state taxes.
Also, even though an organization may “self-proclaim” its tax-exempt status, it is still subject to the rules governing its particular sub-section. It is also subject to IRS examination to determine whether it meets the requirements for the exemption it is claiming.


If your organization wished to obtain 501(c)(3) tax exempt status, then you must file an application for that. I can help . See my Services page

If  instead, your group fits the criteria of a social club (what the IRS calls a 501(c)(7)), then your organization can “self-proclaim” that you are tax exempt without filing the paperwork.

But you still have to obey the rules and fit the IRS definition of a social club. 

What it takes to be classified as a 501(c)(7) Social Club

And you don’t have a nice letter from the IRS to prove that you are tax exempt.

So there you have it…most homeschool support groups, if they operate as a social club, can be considered tax exempt without going through the time and expense of tax exempt application with the IRS.

P.S. But even if your group does not have to file the application paperwork (Form 1023 or 1024), your organization must still file an annual information return called a Form 990/ 990EZ or the simple on-line Form 990N with the IRS. Read more here: IRS Form 990N FAQ

Carol Topp, CPA

Lessons from a goose on leadership


Who knew that geese could tell us so much about leadership?

Geese fly in a V formation to create uplift. They fly 71% farther when flying together than if they flew alone.
Application for homeschool leaders: Don’t run your group alone. Gather other people to help you and you’ll go farther and avoid burnout.

When the lead bird gets tired, he drops out of the head spot and flies in the back to recover and take advantage of the lift from the other birds.
Application for homeschool leaders: Rotate leadership. Bring in fresh, new people. Set term limits for board members.

Geese honk to offer encouragement to each other, sort of an “Atta boy!” or “You can do it! Keep going!” to each other and their leader.
Application for homeschool leaders: Encourage your leaders. Offer appreciation gifts and thank you cards.

Thanks to :


Carol Topp, CPA

More nonprofits can file the easy Form 990N

2009 Form 990

Many homeschool organizations that have tax exempt status are small enough they do not have to file any tax forms with the IRS. And now new IRS guidelines mean even more groups are free from IRS filing requirements!

Small exempt organizations can file the simple Form 990-N, the electronic postcard, instead of the longer Form 990-EZ or  Form 990.

For tax years beginning on or after January 1, 2010, exempt organizations may file the e-Postcard if their annual gross receipts were not more than $50,000.  The previous filing threshold was annual gross receipts of no more than $25,000. Gross receipts include every dollar your organization brings in, even if it goes out immediately too.

The e-Postcard is an electronic notice filed at http://epostcard.form990.org.

Need help determining your gross receipts? Send me an email and we can arrange a private consultation over the phone. Email me here.

If your tax exempt homeschool organization needs help filing their Form 990EZ or Form 990, I can help. Read more here.

Would your homeschool group benefit from being tax exempt? Find out by reading my articles on the pros and cons of tax exempt status.

Carol Topp, CPA

Educator Tax Deduction for Homeschoolers?


The IRS gives a $250 tax deduction to educators for unreimbursed supplies they spend in the classroom.

Can homeschoolers take this deduction?

The IRS guidelines say to be an eligible educator:

“You work at least 900 hours a school year in a school that provides elementary or secondary education, as determined under state law.”

To work means to get paid for your work as a teacher-employee. Homeschool parents are not employees of a school. We do not get paid; we do not get a W-2. The IRS will check for a W-2 from a school if a taxpayer takes the Educator Expense deduction. Homeschoolers would not have a W-2 from a school, even if your state classifies your homeschool as a private school.

The Educator Expense Deduction was initiated by President Geo W. Bush  attempting to get support from teachers and their powerful unions. It was extended at the end of 2010 for one more year.

I do not recommend that homeschool parents take the Educators Expense deduction. Sorry.

Carol Topp, CPA

P.S. Here are my required “lawyer” words:
Internal Revenue Service Circular 230 Disclosure: Advice relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending to another party any transaction or matter addressed herein.

Paying co-op leaders


I am the leader of a support group with around 65 families.  Our group has a board of elders and by-laws.  We also have a co-op of about half the members of the larger group.  The co-op requires members to be a member of the larger group.  The co-op has separate leadership and it’s own checking account. The by-laws don’t address the co-op specifically.

The co-op pays the leadership and teachers from their account.  Tuition and fees are charged for participating families.  Teachers are written checks from the co-ops account monthly. “Teacher Gift” is always written in the memo in the checks. For the most part, curriculum for the classes are decided upon by the leadership of the co-op. Those in the leadership of the co-op serve no other volunteer function in the main group (their leadership on the co-op has been counted as their volunteer service for all the 7 years the co-op has existed ). Another member of the group has complained that their paid leadership service is not volunteer service and should not be counted toward the main group.  I do agree with this.  But it seems that we need to address this and some other issues that aren’t quite right.

Should our groups separate?  The larger group has not reviewed the co-op’s financial records. The co-op only gave out 1099’s last year for the first time.  I know that whatever is done, there will be hurt feelings and I am at a loss to know where and how to tackle these issues.  Where and what should I start with?

Thanks in advance.



Here’s my advice:
PayingWorkersCoverRead my ebook Paying Workers in a Homeschool Organizations. Available as a pdf for immediate download for $7.00 at

Good for your group for finally giving 1099MISC to the teachers!  But you should stop writing “Teacher Gift” in the memo. These are not gifts. They are payments for services.

In my experience, it is untypical for homeschool co-op leaders to be paid. That is because most co-ops cannot afford to pay leaders. Instead, many leaders receive discounted tuition (or free classes) in appreciation for their volunteer efforts.

Since you are paying these leaders, they are employees, not independent contractors as your teachers apparently are (although this statement concerns me: “curriculum for the classes are decided upon by the leadership of the co-op.” It sounds as if they are employees and not independent contractors). Employees require quite a bit more paperwork and may involve paying unemployment tax and workers compensation taxes. I discuss the difference between independent contractors and employees in the Paying Workers ebook.

You asked: “Should our groups separate? The larger group has not reviewed the co-op’s financial records.” Obviously the larger support group has neglected some of their responsibilities. See my blog post on leader responsibilities here:
http://homeschoolcpa.com/what-are-the-legal-responsibilities-of-homeschool-leaders/ Perhaps it is time to weigh the pros and cons of being separate. A lot goes into that decision.

You also said: “Another member of the group has complained that their paid leadership service is not volunteer service and should not be counted toward the main group. I do agree with this. But it seems that we need to address this and some other issues that aren’t quite right.”
You are correct that you cannot pay a volunteer, so perhaps the volunteer service is not fulfilled because they are paid.

If you wish to discuss your group’s issues and concerns, I do offer private phone consultation with homeschool leaders. It’s one of my most popular services. Read more about it here: http://homeschoolcpa.com/services/consultation/

I hope that helps.

Carol Topp, CPA
HomeschoolCPA.com Helping homeschool leaders


I wanted to thank you so much for writing back and give a little update.  The officers met and decided to work at correcting any errors we may be making.  We have a meeting scheduled with the co-op directors in the next couple of weeks.  I think it is so important to set a good example in everything you do.

I do want to add that I was incorrect in that the co-op leaders receive tuition waivers instead of being paid.  Once we get all the information on the finances, then we can make the necessary decisions about our groups.  I am praying for a smooth road.

Your website is very helpful and I have shared it with all the officers of our group.   We are so very appreciative.


Homeschooling as a home-based business


Dear Carol,

I am a homeschooling mother of three. I recently named our homeschool and incorporated the name to offer tutoring and testing for income (in my home). What do I need to do to report the income to the IRS. Should the name be a LLC. or S-Corporation? If you can shed some light on how I need to handle this, I would greatly appreciate it. I need the income to continue homeschooling, and this is unfamiliar territory for me. Thank you in advance for help.


Thank you for contacting me. I wish you the best of success in your new endeavor as a business owner! It can be exciting and overwhelming at the same time.

You said you incorporated the name.  What specifically did you do?  Did you merely register the name or did you file incorporation papers with your state?  There is a big difference with respect to taxes.

Most tutors start out as sole proprietors and never progress to S Corp (or the larger C Corp) status.  There is no need to be a corporation for most tutors. This blog post I wrote might be helpful: Why You Should Be a Sole Proprietor

You might benefit by reading my articles and ebook, Small Business Start Up Guide, available at http://caroltoppcpa.com/services/small-business/

Sole proprietors file a Schedule C as part of there individual Form 1040.  A Schedule C shows all the income and expenses of the business.
Corporations have different IRS forms that are much more complex and usually require a CPA to prepare.

I hope that helps. There is a lot to learn!

Carol Topp, CPA