Self-declared tax exempt status for 501c3 homeschool groups

We are just starting up our group and we do not want to do anything illegal, but we would not qualify as a nonprofit right now, so as per your IRS book, we would be labeled an Unincorporated Association. My question is… Do we need to do anything legally to continue as a group. We do plan to open a checking account and have an EIN number.
I just felt that for a group that is just starting and is not a nonprofit or at the 501 (c) (3) status yet, we don’t know the first steps to get a group of and running and if we need to do anything legally to start. Thank you so much for your time!
-EC

 

Dear EC,

Please watch this video 3 times (yes, 3 times!):

 

You will hear that to legally and correctly set up a nonprofit you need 3 things:

  1. A mission that is not motivated by profit
  2. A board
  3. Organizing documents. Usually bylaws but Articles of Association are also recommended. Get samples here

If you have those three things, your organization is a nonprofit. Congratulations! It may not be a nonprofit corporation; instead it is an unincorporated association, as you mentioned, but it is still a nonprofit.

But, there is a difference between nonprofit status and tax exempt status

Nonprofit status is granted by your state while tax exempt status is granted by the IRS to qualifying nonprofit organizations. Typically nonprofits need to formally apply for tax exempt status with the IRS.

But small nonprofits can self declare  501(c)(3) tax exempt status if your annual gross revenues* are $5,000 or less.

*Annual gross revenues are all the money you take in in a year, even if it just goes right back out. It’s not what is left over at the end of the year. It is not the amount in your checkbook. It is annual (yearly) gross (all) revenues (intake).

This video may be helpful: https://www.youtube.com/watch?v=DCFjnnY7mEw

 

How to self declare 501c3 tax exempt status

Since you have not officially applied on paper for 501(c)(3) status  (you self-declared 501(c)(3) status and don’t have to file the paperwork), your nonprofit organization is not in the IRS database (yet), so you need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their database so you can begin filing the Form 990-Ns.

It typically takes 6 weeks after you call to be added to the IRS database.

Say something like this,

“We’re a brand new 501(c)(3) educational organization and I needed to get added to the IRS exempt organization database so we can start filing our 990-Ns.”


**Note that only 501(c)(3) organizations with less than $5,000 annual gross revenues can “self-declare” their tax exempt status. Organizations with more than $5,000/year in revenues must apply for 501(c)(3) status using Form 1023 or the new, shorter Form 1023-EZ.


The IRS employee will ask for your EIN and organization’s name, address, and probably a contact name.

They may also ask what date your fiscal year ends. Many homeschool groups operate on a calendar year, but some operate on a school year with a year end of June 30 or July 31. Look at the form you filed when you applied for your EIN to see what you chose as your fiscal year end.

They may ask if you have “organizing documents.” They mean bylaws or Articles of Association. So create bylaws or Articles of Association/Articles of Incorporation before you call the IRS. Get the board to approve and sign them. Sample bylaws and Articles of Association can be found here.

Call the IRS early in the morning. They open at 8 am ET and you can usually get through pretty quickly of you call then. Record the date you call, the IRS employee name and their identification number.

 

How to keep your 501(c)(3) tax exempt status

Be sure you go online (IRS.gov/990n) to file the Form 990-N anytime after your fiscal year ends and before its due date which is 4 1/2 months after the end of your fiscal year. If you operate on a calendar year, the 990-N is due May 15.

 

Carol Topp, CPA

Helping homeschool leaders with legal and tax compliance

 

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