What Homeschool Leaders Don’t Know About Losing Tax Exempt Status

What Homeschool Leaders Don’t Know About Losing Tax Exempt Status

Carol Topp, CPA, the HomeschoolCPA will share tips on important issues that homeschool leaders may not know about. This episode will focus on helping homeschool leaders know what to do if their organization has lost its tax exempt status.

Listen to the podcast

Does your homeschool group need to pay taxes?

Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?

I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

Click Here to request more information!

Save

Save

What Homeschool Leaders Don’t Know About IRS Annual Reports

 

What Homeschool Leaders Don’t Know About IRS Annual Reports

Carol Topp, CPA, the HomeschoolCPA will share tips on important issues that homeschool leaders may not know about the IRS Annual Reports. This episode will focus on helping homeschool leaders understand a report that the IRS requires from all tax exempt organizations–including your group! It’s called the Form 990.

Listen to the podcast

Carol Topp, CPA can help with:

Preparation of IRS Annual Return

Preparing the Form 990/990-EZ Annual Information Return for the IRS and your state. The Form 990/990-EZ is due 4 1/2 months after the end of your fiscal year.

This service involves several telephone calls and e-mails and copy of your financial statements (a QuickBooks file is preferred).

I also offer a service I call “Buying Peace of Mind”

This is a a review of IRS forms you have prepared yourself. You can save money by doing much of the work yourself. I will review Forms 1023 or Annual Form 990/990-EZ and offer my opinion and advice.

___________________________________________

Wow Carol!  Thanks so much – just the info you provided here is very helpful.  I look forward to speaking with you as I’m anxious to get started, but I want to do so in the best and most efficient way.  This is new territory for me – so I truly appreciate your guidance!

-Laine Discepoli, Glendale, OH

________________________________________

 

Click Here to request more information!

 

Save

Save

Are homeschool groups “schools”?

Some homeschool groups look a lot like schools. They offer a full curriculum, there are teachers teaching classes, they rent space to conduct the classes, etc.

So is a homeschool program a school?

I’m a CPA, so I tend to follow the IRS definition of “school.” This blog post is filled with lots of IRS-ese. Dig in and slog through the details if you wish or just scroll to the bottom for my answer.

 

IRS definition of “school” is found in the Internal Revenue Code Section 170 https://www.irs.gov/irm/part7/irm_07-026-002.html#d0e549

IRC 170 (b)(1)(A)(ii) Exclusion—Educational Organizations

  1. Educational organizations described in IRC 170(b)(1)(A)(ii) and Reg. 1.170A–9(b)(1), such as primary schools and universities, are excluded from private foundation status under IRC 509(a)(1).
  2. IRC 170(b)(1)(A)(ii) organizations are commonly known as “schools.”
  3. An IRC 170(b)(1)(A)(ii) organization must:
    1. present formal instruction as its primary function,
    2. normally maintain a regular faculty and curriculum, and
    3. normally have a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on

IRC Section 170 reference Reg, 1.170A-9(b)(1) which states:

An educational organization is described in section 170(b)(1)(A)(ii) if its primary function is the presentation of formal instruction and it normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. The term includes institutions such as primary, secondary, preparatory, or high schools, and colleges and universities. It includes Federal, State, and other public-supported schools which otherwise come within the definition. It does not include organizations engaged in both educational and noneducational activities unless the latter are merely incidental to the educational activities. A recognized university which incidentally operates a museum or sponsors concerts is an educational organization within the meaning of section 170(b)(1)(A)(ii). However, the operation of a school by a museum does not necessarily qualify the museum as an educational organization within the meaning of this subparagraph. (emphasis added)

In the Instructions to Form 1023 Application for Recognition of Exemption Under Section 501(c)(3), the IRS gives a clearer definition of a school:

An organization is a school if it:

  • Presents formal instruction as its primary function.
  • Has a regularly scheduled curriculum.
  • Has a regular faculty of qualified teachers.
  • Has a regularly enrolled student body.
  • Has a place where educational activities are regularly carried on.

The term “school” includes primary, secondary, preparatory, high schools, colleges, and universities. It does not include organizations engaged in both educational and non-educational activities, unless the latter are merely incidental to the educational activities. Non-traditional schools such as an outdoor survival school or a yoga school may qualify.   The term “school” does not include home schools.

Answer “Yes” if you have a regularly scheduled curriculum, a regular faculty of qualified teachers, a regularly enrolled student body, and facilities where your educational activities are regularly carried on. Submit evidence establishing that you meet these factors, as described below:

  • Evidence that you have a regularly scheduled curriculum includes a list of required courses of study, dates and times courses are offered, and other information about how to complete required courses.
  • Evidence that you have a regular faculty of qualified teachers, includes certifications by the appropriate state authority or successful completion of required training.
  • Evidence of a regularly enrolled student body includes records of regular attendance by students at your facility.
  • Evidence of a place where your exclusively educational activities are regularly carried on includes a lease agreement or deed for your facility.

If you answer “No,” do not complete Schedule B. You do not meet the requirements of a school and you will need to go back to Part X, line 5, to reconsider your public charity status.


I highlighted a few portions to emphasis a crucial point. Most instructors at homeschool organizations do not fit the definition of “qualified” faculty because they are not certified teachers by the state and may not have training in the subject they are teaching. That doesn’t make them unqualified for your purposes; it just doesn’t fit the IRS’s definition of “qualified.”

I do not consider most homeschool programs to be schools.


If homeschool programs are not schools, what are they?

They are educational organizations.

 

Carol Topp, CPA

Save

Save

What Homeschool Leaders Don’t Know About Tax Exempt Status

 

Carol Topp, CPA, the HomeschoolCPA, will share tips on important issues that homeschool leaders may not know about.

This episode will focus on helping homeschool leaders understand tax exempt status. It’s easier than ever to get tax-exempt status. Should your group apply?

Listen to the podcast

 

Tax Exempt Status for Small Nonprofit Organizations

Contact HomeschoolCPA, Carol Topp, CPA, to arrange for assistance in applying for 501(c)(3) tax exempt status.  This service involves several telephone calls and e-mails.

Carol offers a variety of services:

  •  IRS Streamlined Form 1023-EZ Application
  • Full 501(c)(3) Application
  • Full 501(c)(4) or 501(c)(7) Application
  • State filings
  • Review of Self Prepared Application

Click Here to request more information!

Carol Topp, CPA

HomeschoolCPA.com

Helping homeschool leaders with tax and legal issues

 

Save

Save

What Homeschool Leaders Don’t Know About Non Profit Status

Carol Topp, CPA, the HomeschoolCPA, will share tips on important issues that homeschool leaders may not know about.

This episode will focus on helping homeschool leaders understand nonprofit status for their groups. What does it take to be a nonprofit? Only two things! Did you know that nonprofit status is not the same thing as tax exempt status?

 

Listen to the podcast

 

Does your homeschool group need to pay taxes?

Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?

I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

Click Here to request more information!

Carol Topp, CPA

HomeschoolCPA.com

Helping homeschool leaders with legal and tax issues

 

Save

IRS 990-N down until January 6 2017

The IRS has announced that their Form 990-N, the ePostcard, online filing system will be will be down from December 26, 2016 at 11:59 a.m. until January 6, 2017 at 1:00 p.m. EST due to an annual planned maintenance.

The IRS apologizes for any inconvenience.

The Form 990-N is due 4 1/2 months after the end of your organization’s fiscal year. Many homeschool groups have fiscal years that end on June 30 or July 31, so their 990-Ns were due November 15 and December 15, respectively.


Don’t know what I’m talking about or what an Form 990-N is? Read my 990-N FAQ page.

What’s a 990-N?

Since 2010, the IRS has required all nonprofit organizations file an annual information return. (All means all except churches) The IRS Form 990-N is a simple, online form that all nonprofit organizations with annual gross revenues of less than $50,000 must file every year. That means your homeschool group (unless you are under the ministry of a church).


 

If you are uncertain about your homeschool organizations tax exempt status, please contact me  for a private phone consultation.

My book The IRS and Your Homeschool Organization will also explain your options to become tax exempt and the required reports for tax exempt organizations.

 

 

Carol Topp, CPA

Can I avoid the expense of hiring employees by being a 501c3?

taxes_money_rolls_pc_400_clr_1724

I run a homeschool tutorial in Texas as my small business. My tutors should be classified as employees according to the IRS rules. Due to the expenses and paperwork involved with hiring employees, I would like to set up a 501(C)(3).

I would like to hire you to help me with the process of setting up our local group as a 501(c)(3). Can you help me begin the process of setting up as a 501(c)(3)?

B in Texas

Dear B,
You should understand that having 501(c)(3) tax exempt status does NOT change the employer or payroll taxes you would have to pay.

501(c)(3) tax exempt status only grants nonprofit organizations tax exemption from federal income tax, not the payroll taxes. In other words, nonprofit tax exempt organizations still have to pay payroll taxes such as SS/Medicare, workers comp, unemployment insurance premiums.

Additionally, forming your business as a nonprofit organization means that you are no longer in control of the organization, nor does the money belong to you. The organization must be run by a board. The board can hire you as an employee, but they can also fire you.

Because you are converting a for-profit business to a nonprofit organization, you are not eligible to use the IRS’s short online Form 1023-EZ application form. Instead you will have to use the longer Form 1023 to apply for 501(c)(3) tax exempt status.

So you need to carefully consider your motives in forming a nonprofit, tax exempt organization. It should be done for reasons other than the expense and paperwork of hiring employees, because that burden will still exist as a 501(c)(3) tax exempt nonprofit organization.

Need help understanding the rules regarding paying workers in your homeschool organization? My book Paying Workers in a Homeschool Organization will explain the difference between employees and Independent Contractors and the necessary forms to file.

Carol Topp, CPA

Save

Save

How the IRS defines a school

school_icon_sticker_800_clr_15238

I’ve found your website very helpful.  We are working on starting a “school” which will initially offer a 3 to 5-day program for 5-10 year olds who are being homeshooled.  We would like to obtain 501c3 status.  My understanding is we can call ourselves a school, but I’m wondering if homeschooling needs to be mentioned in the 1023 application or if it just causes complications.  Is it simpler to state that we offer 3 and 5 day programs for educational enrichment for kids aged 5-10 and leave it to the parents to address the homeschooling issue?  They notify the state they are homeschooling and follow the state regs on that.  We are located in Maine.  Thanks for any guidance, thoughts, or advice.

Chris in Maine

 

Chris,

I have helped over 75 homeschool organizations receive tax exempt status. I’ve had no difficulty using the word “homeschool” in the IRS application. I usually state that all families are legally homeschooling in their respective states.

You could call yourself a school, but the IRS has a pretty narrow definition of “school” and there is an additional form to fill out when applying for tax exempt status (Form 1023 Schedule B). Schools are ineligible to use the new, shorter Form 1023-EZ, as well.

The Form 1023 Schedule B requests information on your curriculum (list of courses, dates and times) and “evidence” that your teachers are “qualified” meaning state certifications or required training. They also request records of regular attendance, racial makeup of your student body, and a lease or deed, proving you have a regular place to meet. Take a look here http://www.irs.gov/pub/irs-pdf/i1023.pdf and scroll way down to page 17.

Most homeschool groups that use volunteer parents and vary the classes offered each year do not fit this IRS definition of  a school.

So they do not call themselves a school. They call themselves an “educational organization” or sometimes an “educational enrichment service.”

You asked if  “Is it simpler to state that we offer 3 and 5 day programs for educational enrichment for kids aged 5-10 and leave it to the parents to address the homeschooling issue?”
Well, as I said, I explain to the IRS that the program is for homeschooled students and, yes, the parents are responsible to be sure they are legally homeschooling.

I will review the Form 1023 application for 501c3 tax exempt status for organizations that prefer to fill out the application themselves. See details here: http://homeschoolcpa.com/services/501c3-tax-exempt-status/

 

IRS and Your Homeschool Org cover

My book The IRS and Your Homeschool Organization
explains the pros and cons of 501c3 status and offers tips to get through the application process quickly.

Carol Topp, CPA

 

Save

Save

Summer reading to be a better homeschool leader: The IRS and Your Homeschool organization

Summer is a great time for homeschool leaders to catch up on some reading. I’m highlighting a book each week of summer and this week I’m spotlighting,

I know it’s not a catchy title, but it explains what the book is about. I have no expectations of this book ever being a best seller, but I wrote it to be helpful to the hundreds of homeschool organizations that need to understand tax exempt status.
This book began in 2008 under the title of  Tax Exempt 501c3 Status for Homeschool Organizations with a cover as boring as the title. It was an ebook with only 51 pages.
TEx501c3Cover
In 2011, I expanded the book to 124 pages and changed the title to The IRS and Your Homeschool Organization with the subtitle Tax Exempt 501c3 Status for Homeschool Organizations. And I improved the cover.

IRS and Your Homeschool Org cover

After the IRS simplified the process to apply for 501(c)(3) status in 2014, I updated the book. The second edition includes a chapter on getting tax exempt status reinstated if it is revoked. I also added an index to make finding specific topics easier.
Who should read this book?
  • Anyone running a homeschool organization that’s been around a long time but has never filed anything with the IRS.
  • Anyone who mistakenly thinks they don’t have to do any annual reports to the IRS.
  • Anyone who fears their previous leaders did not do things properly.
  • Anyone starting a new homeschool organization and wants to be sure they are set up properly.

Here’s a special for the summer. Buy my books for homeschool leaders at 25% off. Get paperback versions for $7.50 (usual price $9.95) or ebooks for $3.99 (usual price is $4.95).

Order The IRS and Your Homeschool Organization


Save

Save

Save

Checklist for homeschool co-op

check_off_with_pencil_400_clr_7226

We are going through the process to create a non profit homeschool co-op and were wondering how much it would cost for you to review our paper work or how much it would cost for you to do and submit our paperwork.

Candace

Candace,

I have a listing of my fees here: http://homeschoolcpa.com/services/

My services vary depending on what you mean by “filing your paperwork.” There’s paperwork with your state and paperwork with the IRS. I can help with both types of filings.

Here’s a helpful checklist to keep it all straight!

Carol Topp, CPA

 


 

Candace’s question prompted me to update my Checklist for Homeschool Organizations Applying for Tax Exempt Status.

I know that forming a nonprofit organization and applying for tax exempt status can be confusing. There are just too many unfamiliar terms, IRS thresholds, steps to take and numbers!

This checklist will help you know the steps to take and the correct order.

If you need help at any step or want a personal consultation to discuss your unique situation, please contact me.

I am available to assist your homeschool organization every step of the way. Through my blog posts, books, podcast, and consultations, I try to make confusing IRS rules easy to understand. I have assisted over 80 organizations receive 501c tax exempt status.

Carol Topp 1200x1800

Carol Topp, CPA

HomeschoolCPA.com

Save