Congratulations on 501(c)(3) tax exempt status!

Congratulations to two homeschool organizations that received letters from the IRS this week granting them 501(c)(3) tax exempt status!

JMJ Tampa Bay in Florida

and

Community Homeschool Outreach in OK.

I was so happy to help these organizations achieve this important status.

Would your homeschool group benefit from tax exempt staus? Do you qualify?

Learn more by reading my articles under Leader Tools.

Carol Topp, CPA

Box Tops for Homeschoolers

From the Homeschool Legal Advantage website

Box Tops for Homeschoolers….The Fair Thing to Do

The Christian Law Association’s Homeschool Legal Advantage program was contacted by a home school support group.

A major corporation was assisting schools to raise funds by collecting box tops that could be redeemed for cash.  The support group was initially informed that home schools could participate, but when they tried to redeem the items they had collected, they were told that in order to participate, a school  needed to be accredited.

After a number of phone calls from CLA’s attorneys, the corporation changed its rules.  They did the right thing. Homeschools are able to participate, just like everyone else.

That’s really what we fight for when we serve a homeschool family. We just want fairness.  We are not asking to be above the law or to have our own rules; but in terms of home school families they should be treated like everybody else.

Homeschooling for the foreseeable future – it’s going to continue to be a legal hot button, but the Christian Law Association is ready to serve your home school or Christian school at a moment’s notice.

Thanks to Homeschool Legal Advantage and their efforts to help homeschool groups!

My homeschool co-op has been using Box Tops as a fund raiser for quite awhile. I’m glad things were straightened out so that homeschool groups can continue to raise funds in this way!

Carol Topp, CPA

Homeschool Business and Entrepreneur Directory (FREE!)

Homeschool Business and Entrepreneur Directory™has just been released this week by Paul and Gena Suarez, the publishers of  The Old Schoolhouse magazine.
This digital magazine is being sent out to homeschool families around the world.

And it’s free to everyone!

Feel free to pass this link to your friends. The directory is 200 pages and shares the following:

• What kind of homeschooler are you?
• What is your homeschooling style?
• Unit Studies
• Charlotte Mason Homeschooling
• Eclectic Homeschooling
• Classical Homeschooling
• Homeschoolers in business
• The Relaxed Homeschooling Lifestyle
• Special needs homeschooling
• Gifted homeschoolers
• BEST RESOURCES FOR HOMESCHOOL FAMILIES

I have a few articles and ads in the Directory including:

The Homeschool Business and Entrepreneur Directory™ is full of article on homeschooling and a huge directory of resources and entrepreneurs ready to serve the homeschooling community!

Look and see!

Carol Topp, CPA

HomeschoolCPA ebooks mentioned by HSLDA

I am pleased to announce that Homeschool Legal Defense Association (HSLDA) has mentioned several of my ebooks and articles on their Group Services webpage.

While homeschool groups are not HSLDA members, HSLDA does offer their group services staff, with more than twenty years experience in local and/or state support group leadership, to assist groups by providing examples of how other leaders have handled similar circumstances.

http://www.hslda.org/GroupServices/Leaders.aspx/Legal

On the Leader Support tab you’ll see Legal and Finaincial Resources and my ebooks are articles are metioned there including:

Money Management for Homeschool Organizations by Carol Topp, CPA. (e-book)

“How Do We Become a Recognized Nonprofit?” by Carol Topp, CPA

“Do We Need to Incorporate?” by Carol Topp, CPA

Q&A for Homeschool Leaders (e-book) by Carol Topp, CPA—The most frequently asked questions from homeschool leaders on the IRS, nonprofit and tax exempt status, boards, conflict, money, fund raising, volunteers, paying workers and insurance.

Thanks HSLDA in helping to assist homeschool leaders!

Carol Topp, CPA

Are Homeschool Support Groups Automatically Tax Exempt?

I help homeschool groups file for tax exempt status with the IRS.

Most of them want 501(c)(3) status as a “qualified charity” because they have an educational purpose and desire tax deductible donations, tax -free profits and sometimes other perks that come with 501(c)(3) status.

But their is another type of tax exempt status that may apply to some homeschool organizations: 501(3)(7) Social Club.

This status allows an organization to be tax exempt (no taxes to pay on their profit), but they cannot offer a tax deduction for donations.

Here’s what it takes to be classified as a 501(c)(7) Social Club:

1. Purpose is for pleasure, social or recreation. A nonprofit motive and no part of the net earnings may inure to the benefit of any person having a personal and private interest in the activities of the organization

There must be an established membership of individuals, personal contacts and fellowship. A commingling of the members must play a  major role in the life of the organization.

Common examples include  college fraternities or sororities, country clubs, garden clubs, hobby clubs, etc.

2. Limited membership: membership is limited and consistent with the character of the club

3. Supported by membership fees. In general, your club should be supported solely by membership fees, dues, and assessments. A section 501(c)(7) organization can receive up to 35% of its gross receipts from sources outside of its membership without losing its tax-exempt status. For example, up to 35% of your total revenues can come from fund raising.

4. Business activities. If your club will engage in business, such as selling products or services, it generally will be denied exemption. However, your organization can provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests.

5. Tax treatment of donations. Donations to exempt social and recreation clubs are not deductible as charitable contributions on the donor’s federal income tax return.

Sources:
http://www.irs.gov/pub/irs-tege/rr58-589.pdf
http://www.irs.gov/publications/p557/ch04.html#en_US_2010_publink1000200325
http://www.irs.gov/irm/part7/irm_07-025-007.html

These criteria might fit a homeschool support group. The members are limited to homeschool parents (or interested in homeschooling), meet for social reasons, are supported by membership fees (and maybe a little bit of fund raisers), do not sell products or services and do not collect tax deductible donations.

So most homeschool support groups can be considered 501(c)(7) Social Clubs.

Most homeschool co-ops do not fit this description because they sell services (classes) and have an educational purpose, not a social or recreational purpose. They may qualify for 501(c)(3) tax exempt status as an educational organization.

Confused about whether your organization is a 501(c)(3) “qualified charity” or 501(c)(7) Social Club?

This chart may help:  Compare 501c3 to_501c7

Here’s the good news: If your organization fits the bill to be a 501(c)(7) Social Club, you do not have to do any of the IRS application filings like 501(c)(3) organizations must do. You are allowed to “self-proclaim” tax exempt status.

Carol Topp, CPA

Can’t we operate without IRS tax exempt status?

Carol,

Does my homeschool support group really need to apply to 501(c)(3) tax exempt status with the IRS? It seems like a lot of time and money. We have a small budget and we don’t accept tax deductible donations.

Can’t we just operate as we are?

You described your group as a support group, meaning you exists for the benefit of the members and you do not accept or plan to seek tax deductible donations.

Many larger homeschool organizations, especially co-ops that have an educational function and not just a support group purpose, seek 501(c)(3) tax exempt status for its many benefits:

• tax exemption
• ability to accept tax deductible donations
• ability to participate in fund raisers only open to 501(c)(3) charities

See my article Do we need 501c3 status?

But homeschool support groups are different. They don’t hold classes; they focus on fellowship. Support groups don’t accept donations; they get all their income from membership dues and maybe a little bit of fund raising.

I attended an IRS webinar and asked your question. Here’s what the IRS said:

It is true the Tax Reform Act of 1969 requirement to “give notice,” (to apply for recognition of tax-exempt status) applies only to organizations wanting section 501(c)(3) status.
So, although other types of organizations are not required to file Form 1024, they may still wish to do so in order to receive a determination letter of IRS recognition of their status. Having the determination letter ensures public recognition of their status and may enable exemption from some state taxes.
Also, even though an organization may “self-proclaim” its tax-exempt status, it is still subject to the rules governing its particular sub-section. It is also subject to IRS examination to determine whether it meets the requirements for the exemption it is claiming.

Translation:

If your organization wished to obtain 501(c)(3) tax exempt status, then you must file an application for that. I can help . See my Services page

If  instead, your group fits the criteria of a social club (what the IRS calls a 501(c)(7)), then your organization can “self-proclaim” that you are tax exempt without filing the paperwork.

But you still have to obey the rules and fit the IRS definition of a social club. 

What it takes to be classified as a 501(c)(7) Social Club

And you don’t have a nice letter from the IRS to prove that you are tax exempt.

So there you have it…most homeschool support groups, if they operate as a social club, can be considered tax exempt without going through the time and expense of tax exempt application with the IRS.

Carol Topp, CPA

Meet Carol Topp at a homeschool convention near you!

I’ll be speaking at the following homeschool conventions in 2011:

• Mid South Homeschool Convention March 3-5, 2011 in Memphis, TN

Topics:

Homeschool Leader: Are You Burnt Out?

Micro Business for Teens

• Midwest Homeschool Convention March 31-April 2, 2011 in Cincinnati, OH

Topics:

Homeschool Leader: Are You Burnt Out?

Micro Business for Teens

• Ultimate Homeschool Expo (online) May 2-6, 2011

Topics:

How a Homeschool Co-op Can Bless Your Child

What Your Child Can Learn from Starting a Micro Business

Career Exploration for Homeschool High School Students

• Schoolhouse Expo (online) May 16-20, 2011.

Topic: Micro Business for Teens

• Home Educators of Virginia, June 9-11, 2011 in Richmond, VA

Topics:

Micro Business for Teens: Starting and Running a Micro Business (2 parts)

Budget is a Dirty Word

Help! My Homeschool Group is Growing

How to Teach Your Kids About Managing Money (When You’re Not Doing So Great Yourself)

Lessons from a goose on leadership

Who knew that geese could tell us so much about leadership?

Geese fly in a V formation to create uplift. They fly 71% farther when flying together than if they flew alone.
Application for homeschool leaders: Don’t run your group alone. Gather other people to help you and you’ll go farther and avoid burnout.

When the lead bird gets tired, he drops out of the head spot and flies in the back to recover and take advantage of the lift from the other birds.
Application for homeschool leaders: Rotate leadership. Bring in fresh, new people. Set term limits for board members.

Geese honk to offer encouragement to each other, sort of an “Atta boy!” or “You can do it! Keep going!” to each other and their leader.
Application for homeschool leaders: Encourage your leaders. Offer appreciation gifts and thank you cards.

Thanks to :

http://www.airpower.maxwell.af.mil/apjinternational/apj-s/2007/4tri07/popeeng.htm

Carol Topp, CPA

More nonprofits can file the easy Form 990N

Many homeschool organizations that have tax exempt status are small enough they do not have to file any tax forms with the IRS. And now new IRS guidelines mean even more groups are free from IRS filing requirements!

Small exempt organizations can file the simple Form 990-N, the electronic postcard, instead of the longer Form 990-EZ or  Form 990.

The e-Postcard is an electronic notice filed at http://epostcard.form990.org.

Need help determining your gross receipts? Send me an email and we can arrange a private consultation over the phone. Email me here.

If your tax exempt homeschool organization needs help filing their Form 990EZ or Form 990, I can help. Read more here.

Would your homeschool group benefit from being tax exempt? Find out by reading my articles on the pros and cons of tax exempt status.

Educator Tax Deduction for Homeschoolers?

The IRS gives a $250 tax deduction to educators for unreimbursed supplies they spend in the classroom.

Can homeschoolers take this deduction?

The IRS guidelines say to be an eligible educator:

“You work at least 900 hours a school year in a school that provides elementary or secondary education, as determined under state law.”

To work means to get paid for your work as a teacher-employee. Homeschool parents are not employees of a school. We do not get paid; we do not get a W-2. The IRS will check for a W-2 from a school if a taxpayer takes the Educator Expense deduction. Homeschoolers would not have a W-2 from a school, even if your state classifies your homeschool as a private school.

The Educator Expense Deduction was initiated by President Geo W. Bush  attempting to get support from teachers and their powerful unions. It was extended at the end of 2010 for one more year.

I do not recommend that homeschool parents take the Educators Expense deduction. Sorry.

Carol Topp, CPA

P.S. Here are my required “lawyer” words:
Internal Revenue Service Circular 230 Disclosure: Advice relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing or recommending to another party any transaction or matter addressed herein.

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