Did your homeschool group lose its tax status? (podcast)

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Your homeschool group may have lost its tax exempt status and not even know it! I explain this problem in an episode of the Dollars and Sense Show podcast.

Listen to the podcast here

In 2006, the IRS made filing an annual report (Form 990/990-EZ, 990-N) mandatory for nonprofit organizations. Nonprofits that failed to file the Form 990 for three consecutive years, had their tax exempt status automatically revoked.

In the podcast, I discuss how to know if your group’s tax exempt status was revoked and how to get it back.

Episode #36 Required IRS Reports for Homeschool Groups explains the Form 990.

My book The IRS and Your Homeschool Organization is a helpful resource for homeschool organizations considering the benefits of tax exempt status. Available here.

If you would benefit from a personal phone consultation, I’d would be happy to help your homeschool organizations. Contact Carol.

Carol Topp, CPA

Homeschool groups awarded 501c3 status in less than 10 days!

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Congratulations to the following homeschool organizations who received their 501(c)(3) tax exempt status from the IRS recently and in less than 10 days.

 

The Learning Connection of NJ

Christian Homeschool Organization Interact Connect encourage (CHOICE) of Peidmont, SC

Character Co-op of Noblesville, IN

Texas Bay Area Catholic Homeschool Organization in League City, Texas

 

If your homeschool organization needs help with applying for tax exempt status, please consider letting me, Carol Topp, CPA,  guide you. Here’s a description of my services.

“I have to tell you that I have been extremely busy and feel a less than qualified for this task.  We are all very pleased that you offer this service.”  -Karen, Homeschool leader in SC

IRS reports your homeschool group needs to file every year

IRS reports for homeschool groups

Your homeschool group should be filing some reports every year with the IRS. Did you know that?

Carol Topp, the HomeschoolCPA, explains what forms homeschool groups should be filing with the IRS in this episode of the Dollars and Sense Show podcast.

Listen to the podcast here

In the podcast, Carol answers common questions from homeschool leaders such as:

  • We were told if our income is under $25,000 a year, we don’t have to file anything with the IRS. Is that true?
  • What changed? We never had to file anything with the IRS before!
  • But we’re not a 501c3 organizations (or don’t want to be), so why do we need to file anything with the IRS?
  • We don’t like government intervention. Why do we need to have anything to do with the IRS?
  • Our homeschool group doesn’t make any profit, so why do we have to file a tax return?
  • We’ve never filed anything with the IRS? We didn’t know we had to! Now what? Will be owe back taxes?

Here’s a helpful FAQ page explaining the IRS Form 990-N.

How to get added to the IRS database to file the Form 990-N.

If all this is new to you, don’t panic!

We can arrange a phone consultation with your homeschool leaders. Together we can sort out what needs to be done.

Contact me here.

Carol Topp, CPA

 

What is the difference between a homeschool support group and a homeschool co-op?

From the Facebook group I Am a Homeschool Group Leader, came this question:

After much reading, I have come up with a question… What is the difference between a homeschool group and a homeschool co-op?

I took over the leadership of our local, small, informal, unincorporated homeschool group last year. We’re a group of families that meet for unstructured socialization/play time twice a month. We offer classes for all age groups, workshops for moms & dads, date nights/coffee nights for moms & dads, monthly field trips, monthly activity days, and even some on-going activity days. After reading Carol Topp’s book  Homeschool Co-ops, and talking with the HSLDA support group liaison in regards to support groups, I am thinking that the group I am in charge of is a style of co-op. Is this right, wrong, both or neither?

-Jacquelyn

 

I make a differentiation between co-op and support groups because their tax exempt status is different in the eyes of the IRS.

Homeschool co-ops have an educational focus and qualify for 501(c)(3) status as educational organizations.

Homeschool support groups have social interaction and support as their focus and the IRS would classify them as 501(c)(7) Social Clubs.

Here’s an article explaining the differences. It includes a chart comparing 501(c)(3) (co-ops) and 501(c)(7) (support groups). Homeschool Groups As Social Clubs.

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As homeschooling grows, I’ve seen support groups change into co-ops and co-ops add support activities. Things are not as clear cut as my chart make it seem! So when I consult with a group I ask about:

  • their activities
  • where do they spend their time and their money?
  • what is the source of most of their income and expenses? (that’s how CPA’s think!)

From hearing about their activities and money, I can usually help discern if their group is a 501(c)(3) (educational co-op) or 501(c)(7) social club (support group).

It sounds like Jacquelyn’s group is a support group. Support groups fit the IRS 501c7 social club status and can “self declare” their tax exempt status without officially applying. (educational organizations with more than $5,000 annual gross revenues must apply for 501(c)(3) status).

But the IRS says all nonprofits-even small support groups- are supposed to be filing the annual Form 990N.  Read more here: http://homeschoolcpa.com/irs-form-990n-faq/

For Jacquelyn’s group and hundreds like them, the tipping point comes when the group gets an EIN from the IRS to open a checking account. That’s then the IRS knows about your group and it will need to start filing the annual 990N (it’s online and only 8 question. it takes about 5 minutes once a year).

Important disclaimer: I stated that a co-op is a 501(c)(3) and  a support group is a 501(c)(7), but that is  my interpretation of the IRS tax code. You will not find homeschool groups mentioned in the IRS rules and regulations. (PTL!)  I have discussed homeschool group classifications with IRS employees, read a ton and have attended workshops put on by the IRS. I’m a CPA and homeschooled for 14 years. I still belong to my support group, even though I retired from homeschooling 4 years ago. But I want to make it clear that I am using my CPA knowledge and homeschool experience to help homeschool organizations understand and comply with IRS regulations.

I hope that helps!

Carol Topp, CPA

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P.S. Jacqueline found Homeschool Co-ops: How To Start Them, Run Them and Not Burn Out helpful.

Maybe you would, too.

 

Congratulations! Another homeschool group receives tax exempt status

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Congratulations to Christian Homeschool Organization Interact Connect Encourage (CHOICE) in South Carolina on recently receiving 501(c)(3) tax exempt status with the IRS.

I was happy to help this homeschool organization use the new IRS short Form 1023-EZ. They received their tax exempt letter in 3 weeks.

CHOICE’s leader wrote:

Thank you so much for all of your help.  We have you in our budget now, so that we can contact you with questions whenever we need answers.

I am a little nervous about knowing what forms need to be sent where and when.

If you’re uncertain about what your organization needs to file with the IRS and your state, please contact me. I can help you sort it all out.

Tax exempt status is not automatic! Do you know what forms your homeschool organization should be filing with the IRS?

My (recently updated) book The IRS and Your Homeschool Organization could help you understand when and how to become tax exempt.

Price: $9.95 paperback $3.99 ebook

Carol Topp, CPA

IRS approves 501c3 status for homeschool group in 2 weeks!

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The IRS is certainly speeding up the process to get 501(c)(3) status for small, qualified organizations!

Congratulations to Heritage Home Scholars in Tennessee  on receiving  501(c)(3) tax exempt status with the IRS! They received the coveted IRS determination letter granting them 501(c)(3) tax exempt status in less than two weeks from applying!

I was happy to help them receive 501(c)(3) tax exempt status for the IRS. Learn more here about how I can help your homeschool organization.

 

Do you know the pros and cons of 501(c) tax exempt status? Do you know what tax exempt status could mean for your homeschool group?

My (recently updated) book The IRS and Your Homeschool Organization could help your group as well.

Price: $9.95 paperback   $3.99 ebook

 

 

Carol Topp, CPA

IRS grants 501c3 status to two homeschool co-ops

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Congratulations to SEEK in Indiana and Home Educators TREK in Illinois on receiving  501(c)(3) tax exempt status with the IRS!

I was happy to help both these organizations receive 501(c)(3) tax exempt status for the IRS.

Do you know the pros and cons of 501(c) tax exempt status? Do you know what tax exempt status could mean for your homeschool group?

My (recently updated) book The IRS and Your Homeschool Organization could help your group as well.

Price: $9.95 paperback   $3.99 ebook

 

 

Carol Topp, CPA

Tax Exempt Status for Homeschool Co-ops (video)

I presented as workshop called “Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into” at the Midwest Homeschool Convention in Cincinnati this year.

This is Part 7 of 7 is titled “Tax Exempt Status for Homeschool Co-ops.”

I explain:

  • What tax exempt is and how to get it for your homeschool co-op!
  • Required IRS reports that every homeschool organization needs to file.
  • What to do if your group has not filed the required IRS forms.
  • Homeschool co-ops being under a church.

 

 

In the video I mentioned my books
Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.
The IRS and Your Homeschool Organization
Money Management in a Homeschool Organization

Here’s a handout for the presentation.

More clips from this presentation can be found at HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

Nonprofit status for homeschool co-ops (video)

At the Midwest Homeschool Convention I presented as workshop called “Homeschool Co-ops Are Like Marriage: Know What You’re Getting Into”

This is Part 6 of 7 is titled “Nonprofit Status for Homeschool Co-ops.

I explain what it takes to be considered a nonprofit and that nonprofit status does not mean tax free (or tax exempt as the IRS calls it)!

In the video I mentioned my books
Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.
The IRS and Your Homeschool Organization
Money Management in a Homeschool Organization

Here’s a handout for the presentation.

More clips from this presentation can be found at HomeschoolCPA’s YouTube Channel.

 

Carol Topp, CPA

IRS explains the need for an easy tax exempt application

Form1023-EZ page 1

Did you know the IRS recently (July 1, 2014) released a new, shorter application for 501(c)(3) tax exempt status?

It’s great. I’ve helped about 3 organizations apply for tax exempt status using the new, online Form 1023-EZ and we love it!

TaxAnaylsts.com recently interviewed IRS Commissioner John Koskinen on several issues including the new Form 1023-EZ which will make applying for tax exempt status much easier for small organizations (gross revenues under $50,000 per year). That includes a lot of homeschool co-ops and other educational organizations!

Read the full interview here.

Here are some interesting excerpts (Mr Koskinen rambles a bit, so I did edit out some repetitions)

IRS reason for creating a shorter application form for small nonprofits

“Our existing problem is, it takes these organizations of any size, and certainly small ones, up to a year, over a year, to get approved. And I was concerned when I started and discovered we had a backlog of over 60,000. I was surprised that hadn’t become a bigger issue, because that is a big problem.

“It’s unfair to people who actually want to get through the process. It puts a lot of pressure on people. ..even if you’re going to have a small PTA or somebody, we’re going to give you the same fun-filled examination that Bill Gates has when he puts up his — it doesn’t make any sense. The risk to the public is much greater, and larger organizations are going to be much more complicated and allegedly doing more. And the benefit to the public is deprived by people not being able to get running and do things.

“…we’ve spent a lot of time designing that form to make sure we collect the information that we need.It will be for the first time, digital, online, so we can actually screen the applications and the answers, to pick up ones that we want to take a look at before we give approval to because we’ll know which answers are inconsistent, which ones raise questions, even though they answer them or are supposed to answer them in a way that allows you to get through without more review. So that we will have, for the first time, these applications as opposed to the old forms, we’ll be electronic and we’ll be able to screen them and analyze, as I say, of the 60,000, probably 45,000 are small. We’ll have a lot more control over the 45,000, by simply being able to screen them.

IRS plans to put some nonprofit  organizations through the process of the longer Form 1023

“The second thing we’re going to do, because in some ways it’s a pilot project, is we’re going to take a statistical sampling of the applications and put them through the more rigorous process, to see if they’ve answered the questions correctly, or whether they’ve, in fact, if they’d gone through the 26-page questionnaire, would have been not qualified, whereas that looks like they’re qualified. So we’ll actually do — I don’t know how many hundred we’ll do, but we’ll take a reasonable number of them at the front end and just put them through the process and see how accurate is the short form.  (my emphasis added)

The IRS will initiate a follow up to see if small charities are doing what they said they would do.

“We also are going to spend — take another statistical sample, once they’re out a year, and go out and audit how they’re doing and what are they doing. So they won’t be the same people we know are doing the right thing, because we’ve put them through the 26-page. There will be another set of people who we say, OK, this is what they said they were going to do. They filled out this form. What are they actually doing? And we’ll actually spend more time finding out what they’re actually doing than we do for a lot of them. You know, we have a million, six hundred thousand, 501(c) organizations out there up and running. (my emphasis added)

A more efficient IRS

“And so part of the theory is that (a) we’ll be much more efficient at the front end with the 80 percent of applications that are small, and be able to screen them out more effectively than we have, and we’re going to actually look at them at the front end and look at them a year later, and adjust accordingly.

The automatic revocation of tax exempt status created a need for a simpler reinstatement process.

“The bulk of the organizations are small ones. What happens with small ones is revealed. You know, the Congress passed a law that said if you didn’t file a [Form] 990 for three years, it got revoked. So we revoked 550,000. And 46,000 asked for reinstatement. …The bulk of what happens with these people, not surprisingly, is they start up and they are running whatever they’re doing and they don’t get a lot of funding or somebody decides to move and they just go away. And in fact, one of the advantages of that program — and then we got to streamline a way of getting people back in if they want to — has been, part of the problem, I’ve discovered, with the risk and the problem we have now, is that because it takes so long and costs so much, there’s a gray market in old 501(c)(3)s.

IRS hopes result is less risk to the public and more charitable work being done.

“So I think when you get done with it, as I say, we’re looking for the risks in trying to make sure that there is a problem that we’ll know. We’re also monitoring volume. You know, the theory was we’re going to go over everybody and his uncle who is now going to be a 501(c)(3). Thus far, the pace of applications is consistently the pace in the past. We’ve seen no uptick. But we’re monitoring that as well. But say, OK, are we now getting a lot more — suddenly everybody’s becoming more charitable, and they’ve got new organizations or not. And so we’ll find that.

But the net result is that there will be less risk to the public, that people are getting the benefit of tax exemption and contributions for what they’re doing because we will spend — have more resources available. We’ll be better at the front end, but we’ll have more resources available to check on people at the back end and see are you doing what you said you were going to do. Are you still doing the right thing? Now we’ll know.

One of the things we’re working on is how we can make better use of the 990s, which are, you know, self-reporting, but they give you some indication of where you are. But the real answer is you need to go out and write people notes and say hey, what are you up to, what are you doing, what’s going on? So I think the net result is we’ll have less risk to the public by better using our resources.”

So you made it to the end of reading all that! I’m impressed!

If you think your nonprofit organization is eligible for 501(c)(3) tax exempt status using the new shorter form, please contact me and we can discuss your situation.

Carol Topp, CPA