Group using personal Paypal account

money_exchange_100Hi Carol,

Our (homeschool group’s) yearbook is looking take in the money thru my personal paypal account, then deposit it into an separate bank account so that our Assoc. does cross over the $5000.00 mark. How is this done so that I don’t have to claim the money as extra income.

Currently the association is trying to do a paypal account not just for yearbook for membership dues, they are hesitant because they set up the a paypal account under non-profit, paypal is wanting proof of this and we don’t have it. I suggested that they explain to paypal that they we are a Unincorporated Non-Profit Assoc. and it should be fine.

Sandy in TX

Sandy,

The ideal way to operate is to set up a Paypal account for the association/homeschool group and not run anything through your personal Paypal account.

I understand from other homeschool leaders, that Paypal expects to see proof from the IRS of tax exempt status. They may also accept a nonprofit incorporation certificate from your state. They told one homeschool group they would accept “certified Articles of Incorporation.”

One homeschool registered with Paypal as “Category: Education, Subcategory: Elementary and secondary schools.” While not as accurate as “Charitable/Nonprofit”, it got the job done!

If your organization is not a nonprofit corporation or doesn’t want to be classified by Paypal as as a school, then tell your board that you are using your personal Paypal account and have them record it in the minutes of a board meeting. (“Sandy agreed to allow use of her personal Paypal account for the yearbook project”) Keep a very clear paper trail just in case you are ever audited by the IRS. Keep paper records of every transaction and especially the transfers in and out of the Paypal account. Make print outs from Paypal and file them away with wherever you keep your tax return information. (Do NOT send them to the IRS with your tax return.)

Anyone had problems setting up a Paypal account for their homeschool organization? Id like to hear your experience.

Carol Topp, CPA

Can my individual homeschool have a fund raiser?

HomeschoolCPA has been asked this question twice lately,

Can we (an individual homeschool) be allowed to do fund raising similar to youth sports groups, scouts,etc?

What a good question. In general I say, Yes, you can participate in a fund raiser if the fund raising organization allows it. BUT, the profit you make is taxable income and you’ll need to report it on your tax return.

Another homeschooling mom e-mailed me with a similar question:

With 6 children needing school curriculum, we are coming up short in finances. We contacted a calendar company that said it would be permissible for us to sell calendars as a fund raiser for our homeschool. We accepted personal checks made out to our homeschool name (that we registered with the state school board, considered a non-profit private school). We do not have a checking account with our homeschool name on it. Therefore, we have no way to deposit them.

What is your advice to us? The checks amounted to $90. Is this method acceptable to continue as long as we pay taxes on it? Mrs. W.

By selling calendars Mrs W. was operating a small for-profit business. She is free to use the profit of the small business for anything she wishes,including homeschool books and supplies. Since Mrs W. didn’t mention what state she was in I cannot tell if her state requires business registration. Many do not require any type of registration for a sole proprietorship using your own name. You may have to file a name registration with your Secretary of State to establish a business name.

To deposit these checks Mrs W. need to open a checking account in the homeschool’s name. You’ll have to get an EIN number from the IRS at www.irs.gov (See the Q&A on my website for details www.HomeschoolCPA.com). You can then spend the money in the checking account on homeschool supplies and close it or keep a small amount in it until next year.

Mrs W. should report the $90 as income on her tax return as either Other Income on line 21 of the 1040 or on Schedule C Business Income if she had expenses from the sale of the calendars (postage, mileage, etc…)

Quite a mess for a $90 fund raiser, huh? Before you try a fund raiser for you individual family homeschool make sure its worth the effort of getting a business name, EIN, and checking account. Maybe try having a garage sale or sell something to bring in income instead!

Carol Topp, CPA

Board, Bylaws and Budget

A homeschool leader is asking some excellent questions about writing bylaws, establishing a board and collecting money.

Dear Carol,
I am co-directing an established homeschool group and we are in the process of writing by-laws. My question is:
  • Is it okay to not allow members to have a vote pertaining to the decisions of the homeschool board?
  • Can the by-laws be set up to allow suggestions and recommendations from the members at the approval of the board?
  • Also, is it legal to initially appoint a board without a vote and then fill vacancies at the discretion of the established board?
Our concern is to protect the vision of the homeschool group.
Your website has been a tremendous help to us as well as your article in The Old Schoolhouse magazine. Thank-you for your time and ministry to homeschooler’s.
Misty M

 

Misty,
You have asked several good questions. Your group is fortunate to have you as a co-director.

Yes, it is OK to not allow members to vote; I have been on several nonprofit boards that do not have members vote.

Yes, you can set up your bylaws to allow final approval of ideas to be a board responsibility. You may establish a practice of considering suggestions and recommendations; you may not need to formalize the practice in the bylaws.

Yes, you can appoint a board without a member vote. This is done quite frequently on nonprofit boards, especially fine arts boards (i.e., art museums, symphonies, ballets, etc). Many boards find their own members from interested members, volunteers or patrons.

As a guideline, your board should remember their fiduciary duty (duty of care and duty of loyalty) to manage the funds with the purpose/mission of the organization in mind and not for private gain or benefit.
The board’s job is

  • to provide for fiscal accountability,
  • approve the budget, and
  • formulate policies”

(from “Major Duties of Board of Directors),

In other words, think first of what is best for the organization.

I hope that helps!

Carol Topp, CPA