Checklist for homeschool co-op

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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.

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Carol Topp, CPA

HomeschoolCPA.com

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HomeschoolCPA increased my fees, but you’ll get more!

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I don’t do this often, but I recently increased some of my fees.

My popular phone consultation fee is the same at $60/hour.

My fee preparing the IRS Form 1023-EZ application for 501(c)(3) status for small organizations has increased from $150 to $250.

But starting July 1, 2016 the IRS fee for Form 1023-EZ drops from $400 to $275, so overall your total fee will be less than before. Gotta like that.

Additionally, I used to charge separately for reviewing your Articles of Incorporation  for compliance with the IRS 501(c)(3) rules. Now that will be included in the $250 fee.

And I will also include a letter explaining what your state filing requirements will be for your newly formed 501(c)(3) organization. I used to charge separately for that as well, but it’s now included.

So, your homeschool group can apply for 501(c)(3) status (or get reinstated if your tax exempt status was revoked because you failed to file the annual Form 990-Ns) for less money and get more services!

What’s not to like about that?

Helping homeschool leaders,

 

Carol Topp, CPA

HomeschoolCPA.com

 

 

 

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IRS lowers fees on Form 1023-EZ

 

 PRICE CUT:  $400   $275

 

The IRS recently announced in Revenue Procedure 2016-32, dated May 31, 2016 that it will be decreasing the Form 1023-EZ user fee from $400 to $275.

The fee reduction will be effective July 1, 2016.

If you are about to file, waiting until after July 1 could save you $125.

The Form 1023-EZ in an online application for 501(c)(3) tax exempt status. Organizations must have less than $50,000 in annual gross revenues and meet other eligibility tests to use the Form 1023-EZ.

 

If you need assistance in determining your homeschool organization’s eligibility for use the Form 0123-EZ or assistance in completing the form, please contact me. I’ve assisted more than 20 homeschool organizations apply for 501c3 tax exempt status using the Form 1023-EZ.

Carol Topp, CPA

Homeschool group not open to the public. Is that allowed?

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On your chart comparing the two types of tax-exempt status for homeschool organizations, under 501(c)(3),  it says membership is open to the public. However, many homeschool groups have membership qualifications. Some require members agree with a Statement of Faith or or not participate in a public-school-at-home program.
Thanks for your insights.

Dorothy

Dorothy,
You asked about membership in your homeschool group being open to the public. You do not have to throw open the doors to your homeschool programs and let everyone in. That could be logistically difficult and it could threaten the safety of the children participating in your programs.

I should clarify that 501c3 groups serve a public good-the education of children- but they may limit membership to their group.

Also, when the IRS determines a group is a public charity (and educational organizations are considered public charities), they mean the organization is funded by the public, unlike a private foundation which is funded by an individual or a family.

Remember, we, as Americans, have the freedom to assemble and that means we can determine who can join our groups and who cannot join. So membership requirements are allowed.

Sorry if that was not more clear.

Carol Topp, CPA

Homeschool leader collecting donations without tax exempt status.

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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?
Randi

Randi,

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

Good Luck!

Carol Topp, CPA
HomeschoolCPA.com

Congratulations to homeschool groups on tax exempt status!

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Congratulations to several homeschool organizations recently granted 501(c)(3) tax exempt status by the IRS!

  • LifeShine from San Antonio, TX
  • Grace Home Educators of Martinsville, IN
  • United Christian Homeschool Association in Belton, KY
  • SCOPE Homeschool Group in Ashville, AL

Both Lifeshine and Grace had their tax exempt status automatically revoked for failure to file the IRS Form 990 for 3 consecutive years. Fortunately, I was able to help them get their tax exempt status reinstated and neither group owed any back taxes. Yeah!

Do you know about the IRS required annual reporting for ALL nonprofit organizations (that means your homeschool group, even if you never had to file any reports with the IRS before)?

Do you have questions about the tax exempt status of your organization?

Contact me and I will help your homeschool organization get tax exempt status (or get it back if it was revoked).

It’s better than paying taxes!

Carol Topp, CPA

 

More tips on running a homeschool co-op (podcast)

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Carol Topp, CPA the author of Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out  covers more tips to starting a homeschool co-op in her podcast.

Listen to the podcast

Carol answers questions from homeschool leaders including:

  • insurance
  • background checks
  • tax exempt status from the IRS
  • required annual reporting to the IRS
  • the need for bylaws and policies

Listen to Part 1 of this podcast.

For more information on starting and running a homeschool co-op visit Carol’s website HomeschoolCPA.com

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Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out has helped more than 1,000 readers run their homeschool co-ops. Get your copy here.

Carol has more podcasts for homeschool leaders. See the list of topics.

Can a Classical Conversations community be a tax exempt nonprofit?

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I am directing a local Classical Conversations group, and many churches in our area will not consider housing us because we are not a nonprofit. Since I am basically an independent contractor licensed by CC corporate to run a community in my area, am I potentially eligible to have my community declared a nonprofit?

-Jen, Classical Conversations Director

 

Jen,

I recently discussed nonprofit status for CC Communities with Classical Conversations COO, Keith Denton.  He explained to me that “CC Directors (who are licensees of CC) may form an entity through which to run their homeschooling operations.

CC does not require a director to run his/her homeschooling program through an entity, nor does it require that such director choose a specific type of entity (non-profit versus for profit) for its homeschooling community.

CC recommends that all directors consult with an accountant and lawyer when making the decision of whether to form an entity, and what type.  The decision of which entity to form depends on a variety of factors specific to the director and state where the homeschooling community is formed.  As such, consultation with an attorney and accountant in a director’s community is highly recommended to best address all relevant factors. ”

That was very helpful!

I can help you weigh the pros and cons of for profit or nonprofit status for your CC Community. Contact me to schedule a phone consultation.

Carol Topp, CPA

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A new nonprofit corporation. Do they need to reapply for 501c3 status?

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Hi Carol,

I have been listening to your podcasts. Our group is already a 501c3 registered charity with the IRS. Unfortunately, we registered with our state as an unincorporated association. We would like the limited liability of a non-profit corporation and have the funds to apply, but after listening to your podcast I have a few questions:

1) Do we need to set up a new bank account? Or just change the set up on our current accounts? We have a Paypal linked, Amazon Smile account, Cash for Our Cause through our bank.

2) Will this affect anything with our IRS account? We won’t have to re-apply for 501c3 status will we?

Thanks for your help!
Misty in Texas

 

Misty,

I hope some of my podcasts were helpful! Thanks for listening.

Bad news: You need a new EIN and must reapply for tax exempt status

If your organization now wishes to become a nonprofit corporation (and I highly recommend it), you will have to get a new Employer Identification Number (EIN) and re-apply for 501(c)(3) tax exempt status in the name of your new corporation with its new EIN.

When you create a corporation, it is a new legal entity. So the IRS wants you to get a new EIN and makes you go through the 501(c)(3) application process again. Bummer.

Here’s a recent blog post on that issue: http://homeschoolcpa.com/incorporated-in-your-state-time-for-a-new-ein/

Good News: It’s easier to apply for 501(c)(3) status

Fortunately, the IRS does have a new short application for 501(c)(3) status, Form 1023-EZ. I have assisted about 25 nonprofit organizations get tax exempt status the new Form 1023-EZ. Some have received their tax exempt status in 10 days. That’s much faster than the 3 to 13 months in the past! Contact me if you’d like my help in applying (or reapplying) for tax exempt status.

The bank should make you open a new bank account with the new EIN. Paypal, Amazon Smile, etc. probably don’t care about your new corporate status, but you will need to re-connect them to your new bank account.

Carol Topp, CPA

Is my homeschool group considered a school?

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Hi Carol,
I took a look at the 1023-EZ worksheet to see if we qualify for filing as a tax exempt organization. Question #11 asks if we are an educational facility. Then it goes on to define what they mean. I do not know how our organization would not fall into that category. Our goal is to support homeschooling families by providing weekly classes for middle and high school students. We do make it clear that our tutors are working alongside parents. Parents have the final decision on the grade their student will receive for the class. So, what do you think? Does that mean we do not qualify to apply for tax exempt status?

Virginia

 

Virginia,
Form 1023-EZ Eligibility Checklist Question #11 asks if your origination is a school, college or university described in section 170(b)(1)(a)(ii). That part of the Internal Revenue Code describes a school. I do not consider homeschool programs to be a school as the IRS defines “school.”

One aspect of a school is a “regular faculty,” which the IRS defines as

“qualified teachers instruct the students, and the same teachers do so on a recurrent basis.”

Source: Internal Revenue Manual  viewed http://www.irs.gov/irm/part7/irm_07-026-002.html#d0e549 on 5/11/15.

And by “qualified” the IRS means:

“certifications by the appropriate state authority or successful completion of required training.”

Source: Instructions for Form 1023

So when you look beyond the Eligibility Checklist into the guts of the IRS code, you’ll probably agree with me that homeschool organizations are not schools because they do not have regular, “qualified” faculty. Most of the teachers in your homeschool organization may be qualified to teach a class at your homeschool co-op, but are not state certified, nor trained as teachers.

Your homeschool organization (probably) qualifies to be a 501(c)(3) tax exempt organization as an educational organization, but not as a school.

I hope that helps!

Carol Topp, CPA