My homeschool is a private school. Can I use 529 funds?

I explained in “Can homeschoolers use 529 plans? Maybe!” that you can use 529 savings account funds for tuition paid to a public, private, or religious school.

Some homeschool students take classes from private schools (locally or online). The tuition payments to these schools can use 529 funds without  penalty or taxes.

So that begs the question,

“In my state, my homeschool is considered a private school. So can I use 529 funds for my private school/homeschool expenses?”

No. Sorry!

Here’s why:

The expenses must be to pay tuition. You don’t pay yourself tuition! That would be silly and not tax-smart.

Your other homeschool expenses such as books, curriculum, school supplies, field trips and are not paymnets for tuition and so you cannot use 529 funds without paying a hefty penalty!

Tuition payments to organizations that are not schools like your local co-op, Classical Conversations, etc.  cannot use 529 funds either (without incurring taxes and a 10% penalty!)

Carol Topp, CPA

Boards, Bylaws and Budgets for Your Homeschool Co-op

 

Does your homeschool co-op have a budget?

When running your homeschool co-op, you should have a board, bylaws and a budget. In this short podcast episode (10 minutes), Carol Topp, CPA offers advice and tips on these important topics to running a successful group. This podcast is an excerpt from a workshop titled Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

 

 

In the podcast Carol mentioned other podcast episodes in this series. Find them (#121-125) at HomeschoolCPA.com/Podcast

 

Featured resource

Phone Consultation with Carol Topp, CPA

Phone Consultation: A pre-arranged phone call to discuss your questions. My most popular service for homeschool leaders. It’s like having your own homeschool expert CPA on the phone!

Cost: $75/hour to nonprofit organizations.  $100/hour to for-profit businesses. $60 minimum.

Q &A by Email:  I am willing to answer questions by email, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails. Minimum $25.

Contact HomeschoolCPA, Carol Topp, CPA, to arrange a telephone consultation.

Click Here to request more information!

Carol Topp, CPA

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Nonprofit Incorporation for Your Homeschool Co-op

 

Should your homeschool co-op be a nonprofit corporation?

This podcast is an excerpt from a workshop titled Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

In this short podcast episode (12 minutes) Carol Topp, CPA explains the benefits of forming your homeschool co-op as a nonprofit corporation and why a leader would want limited liability protection.

 

In the podcast Carol mentioned other podcast episodes in this series. Find them (#121-125) at HomeschoolCPA.com/Podcast

 

Featured resource

The IRS and Your Homeschool Organization

Does your homeschool group need to pay taxes?  Could they avoid paying taxes by being a 501c3 tax exempt organization? Do you know the pros and cons of 501c3 status? Do you know what 501c3 status could mean for your homeschool group?  I have the answers for you in my book The IRS and Your Homeschool Organization. The information I share in my book has been helpful to homeschool support groups, co-ops, music and sports groups and will help you understand:

  • The benefits of 501c3 status
  • The disadvantages too!
  • What it takes to make the IRS happy
  • What your state requires
  • Why your organization should consider becoming a nonprofit corporation
  • What is the difference between nonprofit incorporation and tax exemption
  • IRS requirements after you are tax exempt

Click Here to request more information!

Carol Topp, CPA

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Starting Your Homeschool Co-op with a Mission

 

When starting a co-op, did you consider your mission?

Do you have a mission for your homeschool group?

You know that you cannot be all things to all people. Having a mission will help you focus and avoid burning out.

This podcast is an excerpt from a workshop titled Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

In this short podcast episode (10 minutes) Carol Topp, the HomeschoolCPA, will explain what a mission statement looks like.

 

Featured resource

Phone Consultation with Carol Topp, CPA

Phone Consultation: A pre-arranged phone call to discuss your questions. My most popular service for homeschool leaders. It’s like having your own homeschool expert CPA on the phone!

Cost: $75/hour to nonprofit organizations.  $100/hour to for-profit businesses. $60 minimum.

Q &A by Email:  I am willing to answer questions by email, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails. Minimum $25.

Contact HomeschoolCPA, Carol Topp, CPA, to arrange a telephone consultation.

Click Here to request more information!

 

Carol Topp, CPA

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Does using a distance learning program mean I can use 529 funds?

 

If you are homeschooling using an accredited, distance learning program like Mother of Divine Grace where you pay tuition, can you then use your 529 plan money?

Katie in Indiana

 

Katie,

529 plans have been a popular way to save for college expenses and have the gains be tax-free when used for qualified educational expenses. The Tax Cut and Jobs Act or 2017 expanded the use of 529 plans to include K-12 expenses. The laws says this about using 529 plans for K-12 expenses:

the term ‘qualified higher education expense’ shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.” (emphasis added)

There are 2 conditions for you to use 529 funds for K-12 expenses:

1) the costs must be for tuition and

2) the institution you pay must be “a public, private, or religious school

Mother of Divine Grace (MODG) is a California for profit corporation that describes itself as a private school and a private distance school in their California filings.

So if your children are enrolled at MODG (or similar private schools offering distance learning), you paid MODG tuition, and MODG is a school, then you can use your 529 plan to pay for tuition.

Homeschool parents should check with the program to whom they are paying tuition to determine if it is a school according to their state’s definition. If you have any concern about their status as a school, then do not use 529 funds to pay for the tuition. Withdrawals from a 529 fund that are not “qualified” (i.e. tuition paid to a public, private, or religious school) then you must pay income tax and a penalty of 10%. Ouch!

Your other homeschool-related expenses such as books, supplies, equipment, and payments to organizations that are not schools (like a homeschool co-op) cannot use 529 funds.

Carol Topp, CPA

 

 

Leading a Large Homeschool Co-op

 

Do you lead a large or growing homeschool co-op?

In this short podcast episode (20 minutes)  Carol Topp, the HomeschoolCPA, interviews Kendall Smith who leads a large homeschool co-op. She explains how they transitioned from an enrichment-only group to offering academic classes and getting volunteers and teachers. She offers sage advice on running a group successfully.

Featured resource

Homeschool Co-ops:
How to Start Them, Run Them and not Burn Out

 

Have you ever thought about starting a homeschool co-op? Are you afraid it will be too much work? Do you think you’ll have to do it all by yourself? Starting a homeschool co-op can be easy! This book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out will give you ideas, inspiration, tips, wisdom and the tools you need to start a homeschool co-op, run it and not burn out!

Click Here to request more information!

Carol Topp, CPA

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Protect the children in your homeschool group

Homeschool leaders,

Do you know how to keep the children in your homeschool group safe? What should you do if you suspect child abuse?

Here’s a helpful resource: Child Safety Guide, a 40 page ebook from GuideOne Insurance. It had a lot of safety checklists, a sample consent form, an incident report, and Child Protection Policy sample.

It also has information on background checks and what to do if you suspect child abuse.

Very helpful. It’s free. All it costs is your email address.

 

FREE E-BOOK | Protect the children in your ministry

 

I originally shared this information on my Facebook page: https://www.facebook.com/HomeschoolCPA/

and in a Facebook group I co-lead: I Am a Homeschool Group Leader. It’s a group of almost 400 homeschool leaders from across the USA supporting each other by answering questions about running a Homeschool group. Come join us!

 

Download the Child Safety Guide today, read it, and discuss it with your board.

Let’s hope you never need the information shared there, but if you do you’ll be glad you had this resource.

Carol Topp, CPA

HomeschoolCPA.com

More Ways to Avoid Leader Burnout

 

Want more tips on how to avoid burnout?

In this short podcast episode (15 minutes)  Carol Topp, the HomeschoolCPA, will share 5 more ways to avoid burnout as a homeschool group leader.

Featured resource

Homeschool Co-ops:
How to Start Them, Run Them and not Burn Out

 

Have you ever thought about starting a homeschool co-op? Are you afraid it will be too much work? Do you think you’ll have to do it all by yourself? Starting a homeschool co-op can be easy! This book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out will give you ideas, inspiration, tips, wisdom and the tools you need to start a homeschool co-op, run it and not burn out!

Click Here to request more information!

Carol Topp, CPA

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Tax deductible donations without IRS determination letter

We have an EIN and file 990-N annually but fall under the classification of a group self declares our tax exempt status because we make less than $5,000 a year. We have not gone through the formal 501(c)(3) application process with the IRS. I was talking with IRS today and I believe I understood them to say we cannot give a form to a donor stating their contribution is tax deductible.

If that is the case how can we assure potential donors we are tax deductible and doesn’t a donor need documentation for when they file their taxes?

Mark

 

Mark,

One of the major drawbacks for small 501(c)(3) organizations who chose to “self-declare” their tax exempt status is that they lack the official IRS determination letter proving that donations are tax deductible (See the photo above for an example of the IRS determination letter).

This important letter can give donors assurance that their donations are indeed tax deductible.

Technically, your organization can still receive tax deductible donations, but your organization lacks “proof” to show a donor.

A donor must keep a record if the donation is more than $250. This record is usually a letter from the charity, but a bank record (a cancelled check) may suffice. This record is only given to the IRS if the donor is being audited by the IRS.

Your homeschool group may be listed in the IRS database of Exempt Organizations since you have been filing your  Form 990-Ns every year. Visit IRS Select Check and see if your can find your organization listed as “Has filed Form 990-N” or “Are eligible to receive tax-deductible charitable contributions.” If you are in the IRS database you can be assured that you can accept tax deductible contributions.

The best way to assure potential donors would be to file the Form 1023-EZ (fee $275 to the IRS and takes about 3-4 weeks). Then you get the official IRS determination letter.

I can assist you in filing the Form 1023-EZ. While it is a much simpler form than the full Form 1023, it can be confusing and you will want to be sure it is filed correctly.

Email me if you’d like my help.
Carol Topp, CPA

5 Ways to Avoid Homeschool Leader Burnout

 

Homeschool leader, are you tired? Are you burned out?

Leading a homeschool co-op can be exhausting. Carol Topp, Homeschool CPA, shares 5 ways to avoid burnout as you lead your homeschool group.

Featured resource

Homeschool Co-ops:
How to Start Them, Run Them and not Burn Out

 

Have you ever thought about starting a homeschool co-op? Are you afraid it will be too much work? Do you think you’ll have to do it all by yourself? Starting a homeschool co-op can be easy! This book Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out will give you ideas, inspiration, tips, wisdom and the tools you need to start a homeschool co-op, run it and not burn out!

Click Here to request more information!

Carol Topp, CPA

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