Are you asking for donations on your website?

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Does your homeschool group accept donations on your website? Lots of nonprofits do and its a handy way for donors to send a donation.

But did you know that having a donation button on your website could mean that your organization would need to register as a charity in almost all 50 states? What a load of paperwork!

Harbor Compliance explains that, fortunately, many states follow the Charleston Principles for accepting donations on a website.

Generally, the Charleston Principles assert that registration (with each state) should only be required if:

  • non-internet activities alone suffice to require registration, or
  • the nonprofit solicits contributions through its interactive website or specifically invites further offline activity to complete a contribution, and either:
    1. Specifically targets persons physically located in the state, or
    2. Receives repeated or substantial contributions. (“Repeated” and “substantial” are left up to each state to define.)

The principles leave a lot of room for interpretation, which brings us to some practical state-specific pointers.

Top 5 Tips When Soliciting Donations Online:

As you prepare to solicit donations online:

  1. Always register in your state of incorporation.
  2. Following-up with fundraising contacts residing in unregistered states may trigger registration. For example, you receive an unsolicited and insubstantial contribution through your website from a resident of a state in which you are not registered. If you then solicit that contact via e-mail, phone, mail, or any other medium, that will be treated as solicitation triggering registration. E-mail is generally treated the same as a mail or in-person solicitation.
  3. Soliciting through a charity portal alone such as www1.networkforgood.com does not trigger registration. That is because it is a donor-advised fund that exists to distribute funds to other nonprofits. Technically the donation is given to the fund as the payee. Scrutinize any website before assuming it is a donor-advised fund; their fine print may pass the burden of charitable registration on to you.
  4. Your nonprofit may consider hosting a non-interactive websites that encourage donations through third-party sites or offline means. This may still trigger registration – it is not a loophole.
  5. You can use social media to send out information about your nonprofit’s activities without needing to register. When your language invites solicitation, you do need to register. A fan promoting donation independent of the nonprofit does not trigger registration.

Thanks to Harbor Compliance for this helpful information.

My source: https://www.harborcompliance.com/information/online-fundraising-charleston-principles

Carol Topp, CPA

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Homeschool leaders summer reading: Money Management in a Homeschool Organization

This summer I’m encouraging homeschool leaders to take time to become a better leader by reading through my books. This week I’m featuring my book,

When I originally published this book in 2008, it was a short 40 page ebook and had a horrible cover.  I was still learning and self-publishing was brand new!
MoneyMgmtCover
An update was badly needed and I tackled that project in 2014. The book ballooned to 131 pages and I subtitled it “A Guide for Treasurers.” I feel like I poured my CPA brain into this book.
Cover Money Mgmt HS Org
 Topics covered in this book include:
Chapter 1: Your Treasurer is a Gem!
Chapter 2: Checking Accounts Done Right
Chapter 3: Super Simple Bookkeeping Basics
Chapter 4: Show Us Your Books! Regular Reporting on Financial Status
Chapter 5: Establish a Budget: You’ll Thank Me Later
Chapter 6: Get What’s Coming to You: Collecting Fees
Chapter 7: Do I Have to Report This? Reimbursement Policies and Avoiding Taxes
Chapter 8: Using Software to Stay Sane
Chapter 9: Fraud: It Couldn’t Happen to Us
Chapter 10: Need More Money? Easy Fundraisers for Homeschool Organizations
Chapter 11: Risky Business: Insurance for Homeschool Groups
Chapter 12: Paying Workers: Hiring Employees and Independent Contractors
Chapter 13: Homeschool For Profit: Running a Homeschool Group as a Business

Here’s a special for the summer. Buy Money Management in a Homeschool Organization for 25% off. Get the paperback version for $7.50 (usual price $9.95). The ebook price is only $3.99.


Order Money Management in a Homeschool Organization paperback
Order Money Management in a Homeschool Organization ebook in Kindle or pdf

 

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Sponsoring fundraising groups

FiscalSponsor umbrella

Hello Carol!

We have a question about fundraising and sponsoring subgroups.  Our homeschool group is planning on filing for 501c3 soon (if we can’t figure it out, we are hiring you!).  We have a subgroup (Destination Imagination, comprised of a few smaller groups of kids) that wants to raise money by working basketball games themselves but use our insurance and have us deal with paperwork and money.

We will have a clear understanding of who gets what money and when before we vote on it. They have proposed we keep 5% for our trouble. We are all wanting to say yes, but as president, I need to make sure it’s okay rule/law-wise.

Can you think of a reason not to allow this?

Kristen in Oklahoma

Kristen,

Good luck in your 501c3 application. I can also review the application you fill out. It’s a less expensive option.

What you are proposing is called “fiscal sponsorship” or sometimes “fiscal agency.” It means that one nonprofit organization  acts as a sponsor for a project or group that does not have its own tax-exempt status. And as you spelled out, it is typical for the sponsor to charge a fee (5% in your case) for managing the  other project or group.

Google “fiscal sponsorship” to get a better idea of what’s involved.

I would recommend you wait until you have tax exempt status (or at least have applied for it) before considering a fiscal sponsor arrangement.

Also put the agreement in writing, so all parties know what is required of the and the length of the agreement (at most one year and renew it every year). Sounds like you were going to do that.

Make sure the arrangement doesn’t put you over any IRS threshold. For example, if your gross annual revenue is more than $50,000/year, you will need to file the Form 990-EZ or 990, not the simple online Form 990-N. If Destination Imagination income causes  you to hire someone to prepare the more complex Form 990-EZ/990, are you making enough from DI to cover that added expense?

Carol Topp, CPA

 

Homeschool groups and huge fundraisers can be a bad thing!

Hey Carol –

I have been perusing your site as we are getting ready to start a new homeschool group (breaking off a larger group) in our area. Based on the info I have read, I feel that we identify the most as a 501c7 social group.

We will be offering clubs, fellowship, and field trips as our primary purpose. As a larger homeschool group, we have sold Discount Cards with local businesses/restaurants giving certain discounts to patrons. We sold them for $5 each. This has been a huge fundraiser for the bigger group. One box of cards is $5,000 (not all profit as there is expense from the printing).

My question is if as a new group we could sell these to help with our expenses and if the UBI would be taxable? We definitely want to do things correctly. The sellers would be the members of the group and done voluntarily.

I appreciate any help you can provide. Thanks!

Joyell

Joyell,
Your organization avoids the UBIT tax because the fundraiser is conducted substantially (or in your case, completely) by volunteers.

But you need to be careful that at least 65% of your total income comes from membership dues. Therefore, a maximum of 35% your income can come from fundraisers. Note that this is income, not the net proceeds of your fundraiser.

Something like this:

Your group’s total income = $10,000

Membership dues (this can include field trip income) must be $6,5000 or more (at least 65% of total income)
Fundraiser income cannot be more than $3,500 (max of 35% of total income)

One of the problems with this type of fundraiser is that it brings in so much income (and of course has substantial expenses as well), it can that it can jeopardize your 501(c)(7) tax exempt status because the fundraiser income exceeds 35% of total income.

This may mean that you are no longer tax exempt and will owe taxes on your surplus each year.

IOW, the IRS requires 501(c)(7) social clubs organizations to get most of their funds from members and not from selling products or other fundraisers.

I hope that helps.

Carol Topp CPA

Will fundraisers cause a homeschool support group to pay taxes?

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I looked at the description of the 501c(7) Social Club status, and also reviewed your comparison chart between c3 and c7 status. I agree that our homeschool group most closely fit the 501(c)(7) Social Club status.

However, I was wondering if our periodic fundraisers would cause us to be taxed – your chart says on income from other sources.  We hold the fundraisers when our funds from membership are too low to pay the rent and other costs.
Thank you,
Lisa R

 

Lisa,

I’m glad you’ve figured out the differences between 501c3 charity and 501c7 Social club status. It’s important to figure out where your group fits.

You asked if periodic fundraisers would cause you to be taxed. It could be a problem, but not likely.

In general, fundraisers are considered “unrelated income” and nonprofits must pay tax on unrelated income (called Unrelated Business Income Tax, or UBIT).

Fortunately, the IRS offers several ways to avoid the UBIT tax. The exceptions include:

1. If the fundraiser was substantially conducted by volunteers (if no one was paid to run the fundraiser, then the proceeds are not taxed)

2. The fundraiser proceeds under $1,000 is not taxed.

The IRS has more exceptions to UBIT, but one or both of these exceptions to paying unrelated business income tax probably apply to your group.

Additionally, the IRS requires 501c7 Social Clubs to have most of their income come from membership fees (65% or more). You probably saw that on the chart comparing 501c3 to a 501c7 Social Club.

So make sure that your fundraisers stay under 35% of your total income. You said they are periodic and sound as if they are secondary to your membership fees (“We hold the fundraisers when our funds from membership are too low to pay the rent and other costs”).

I hope that helps.

Carol Topp, CPA

Insurance and fundraising for a homeschool team

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Carol,
Our homeschool group has an engineering class that has become a finalist team in an invention competition at MIT.  The teacher needed us as a non-profit organization to “back” or “sponsor” the team. All that means is we needed to support the team (not financially, but letter of recommendation).

Now that we have become finalists it is very possible we will be selected to travel to MIT for the competition.  Our concern is liability.  Is there a way for us to continue to support the team without a worry about insurance for the travel?  Can we have parents sign a waiver of liability?
The teacher has agreed to fund raise but NOT have any of the money go through our accounting, since we need to limit our income due to the 5013c requirements.  Our income needs to stay below a certain amount. We are a large coop and so our dues add up quickly.
Mary S
Mary,
Congratulations on your Engineering teams success!

I’m not an insurance or risk expert, so I am not really sure how “sponsoring” an academic team makes your organization responsible if there is an accident while traveling. Yes, have parents sign a waiver, but that is not guarantee that you’re free of responsibility. It just reminds parents that they should be carrying medical insurance on their children.

  • Act in a responsible, safe manner and you’ll lessen the risk.
  • Ask for drivers licenses from the drivers.
  • Ask if they have speeding tickets, their own insurance, etc.
  • Have chaperones at all times, never let the kids go off by themselves, etc.

I bet you can search the internet and find a waiver and maybe even rules to follow. Ask the competition for samples of waivers or contact the other groups coming and ask for their policies.

Does your co-op have liability insurance? You should call your insurance agent and talk to him/her. They may say your group is covered under your current policy or write you a special event rider.

Limits on nonprofit income

The dollar limits the IRS imposes are for organizations that have not yet applied for 501c3 status (if gross income is under $5,000 a year, a group can be considered tax exempt without filing the application form with the IRS).

If you already have 501c3 status (and have an IRS letter to prove it), you are not limited in the dollar amount you can raise. For example, the Red Cross raises millions each year to help  in disasters.

The IRS does have dollar thresholds when filing the annual Form 990. For example if your gross income is under $50,000 you file the simple on-line 990-N form once a year. If your gross income is $50,000-$200,000, you file the Form 990-EZ. The gross income determines what form you file, but does not limit the amount you can raise.

Check with whoever told you that you had to stay under a certain dollar amount. I think he/she may be confused.

Carol Topp, CPA

Ideas of easy fundraisers for homeschool groups

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Your homeschool organization probably looks for extra ways to bring in money. Carol Topp, the Homeschool CPA, shares ideas for easy fundraising in this episode of the Dollars And Sense Show podcast.

Listen to the podcast here

Easy fundraisers show notes:

Coupon and reward programs
Box Tops. Need 501c3 status
Shopping reward like Kroger Plus program
E Scrip

Food as a fundraiser
Pizza sales, bake sales to members
Candy, popcorn sales to public could impose a reporting to you state’s AG office
Restaurant (Chik-Fil-A) give a percent of proceeds from one night to your organization
Dinners as fundraisers

Donations
Via email, website, crowd funding, etc
Read-a-thon or walk-a-thon
Car washes and bake sales

Sell products
Ideas at TopSchoolFundraisers.com
Used curriculum sale. Charge an entrance fee, or a table fee to the sellers (or both!)

Reporting the Fundraiser income:
The IRS considers fundraisers to be unrelated to your nonprofit purpose and therefore, subject to taxation. Exceptions to the Unrelated Business Income tax:

  • Under $1,000 income from fundraisers in a year
  • All volunteer labor (no hired help to run the fundraiser)
  • Not regularly carried on
  • Selling donated items

State may require reporting to their attorney General if you sell to the public or solicit donations from the public. Usual exceptions are: only sales to members, a dollar threshold ($25,000 is common), all volunteer labor, but these vary by state.

Warning: No Individual fundraising accounts!
See http://homeschoolcpa.com/scouts-dont-allow-individual-fundraising-account-and-neither-should-you/

More information:
Money Mgmt HS OrgCover

Money Management in a Homeschool Organization book

Blog posts on fundraising: http://homeschoolcpa.com/tag/fund-raising/

Article “Easy Fundraisers for Homeschool Groups” at http://homeschoolcpa.com/leader-tools/articles/

 

If you enjoyed this podcast, please leave a review on iTunes. (click on View in iTunes to leave a review)

How to leave a review on iTunes

Thank you!

Carol Topp, CPA

Scouts don’t allow individual fundraising account (and neither should you!)

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I am frequently asked questions about fundraisers for homeschool groups, especially about individual fundraising accounts.

What’s in Individual Fundraising Account?

An individual fundraising account is any method by which a nonprofit group credits an individual or family for some or all of the funds raised by that individual or family. Usually, credit is given for sales of products and services at the organization’s fundraising events.

Aren’t IFAs used by a lot of youth organizations?

These IFAs are very common, especially in scouting and  youth sports. In the past, youth organizations followed some simple guidelines  that they thought made the practice of creating IFAs acceptable. Here’s an example of an IFA policy.

I’m a conservative CPA and always discouraged the use of any IFAs. I’m not alone. ParentBooster.com strongly discourages IFAs and Trail Life USA  disallows IFAs for their members.

Boy Scouts discontinuing Individual Fundraising Accounts

And now it appears that the Boy Scouts USA has also changed their policy regarding IFAs. According to BobwhiteBather.com,

Source: http://bobwhiteblather.com/new-policy-prohibits-individual-scout-fundraising-accounts/

… the Boy Scouts of America is beginning to inform units that they may no longer allocate fundraising proceeds to “Scout accounts” for the private use of members to pay their expenses. This goes against a longstanding recommendation that units should use fundraising to allow individual Scouts to pay their own way. The new policy was first found buried in a publication aimed at councils on running effective product sales, which was released late last summer, and most recently appeared in Fiscal Policies and Procedures for BSA Unitsa summary of frequently-asked questions about unit finance.

 

FYI, the Boy Scout document cited above says quite clearly, “Funds raised by the unit from product sales belong to the unit. They may not be transferred to the Scout.”

So, my advice to homeschool organizations is unchanged:

  • Do NOT set up individual fundraising accounts.
  • If you have them now, STOP!
  • If you conduct fundraising, do not record how much each family brought in.
  • Do not have a system where tuition or dues are reduced by the amount of fundraising a family conducts.

You may find your organization can still function quite well, or even better without individual fundraising accounts like Becky’s homeschool group did.

Carol Topp, CPA

Homeschool co-ops and money!

Homeschool CPA, Carol Topp, was recently interviewed on the podcast Homeschooling Co-op Style by host Pat Wesolowski.

Podcast host Pat Wesolowski

 

 

Carol and Pat discussed the ins and outs of money matters in regard to co-ops and other issues that pertain to homeschoolers (such as fund raising)!

The thought of formalizing your co-op into a non-profit might not have entered your mind.

However, there are benefits to becoming a non-profit and, if you hire teachers you may find it quite beneficial.

Listen to the podcast here

The podcast runs about 30 minutes. Listen in iTunes here!

Can you fund raise or accept donations as a homeschooling family?

Dollarsinhand

If I am going to homeschool my own children and am not part of an organization, is there a way to fund raise or receive donations for homeschooling and keep it separate from our home income? Do we need to still claim it as part of a household income if we are using it for school purposes? Are there any tax deductions or credits for homeschooling?

Jena F in AZ

 

Jena,

I’ve been asked before about fundraising to a family to help with homeschool expenses. Here’s a blog post on the subject:
http://homeschoolcpa.com/can-my-individual-homeschool-have-a-fundraiser/

You may fund raise, but the the income is considered earned income from a business and the profit is fully taxable.

You can accept gifts from generous people, but they will not be tax deductible donations to the donor because your family is not a qualified charitable organization.

There are no federal tax deductions for homeschool expenses, but some states, such as Indiana allow educational deductions to all parents, public, private school and homeschool.
Here’s another blog post on that subject: http://homeschoolcpa.com/?s=tax+deductions

AZ does have some tax credits for education, but they are for donations to a school, not for individual expenses. Read more here:
http://www.azdor.gov/TaxCredits/SchoolTaxCreditsforIndividuals.aspx

I hope that helps,
Carol Topp, CPA