Our homeschool group leader just opened a Paypal account and has begun asking for donations. This seems a little weird and as though we need to be a nonprofit if money is collected from members. I referred her to your website, but she believes we have nothing to worry about. Is this true? Should we be a nonprofit if money is involved? How can I help her understand the ramifications of not using your resources?
Thank you for contacting me.
Oh dear, your leader thinks she has nothing to worry about! It’s just not that way anymore!
Whenever an organization collects money from either member dues or donations, the leaders have a fiduciary responsibility for managing that money properly. If they do not manage the money properly or get organized properly with the IRS, the leaders can be held personally liable for any mistakes.
This blog posts explains the fiduciary responsibility of leaders: http://homeschoolcpa.com/what-are-the-legal-responsibilities-of-homeschool-leaders/
An organization cannot accept tax deductible donations unless they have 501(c)(3) tax exempt status from the IRS. Most homeschool groups collect membership dues, but those are not “donations” and they should not be called donations.
How can you help your leader be more responsible? Explain that if your group is not properly organized then the money she is accepting will be seen as her taxable income by the IRS and she will have to pay taxes on it!
To get properly organized start by reading a few of my blog posts and articles.
This quick video may help as well: https://youtu.be/FLvfw23z7M0