Can a homeschool athletic booster club be a 501c3?

FreeDigitalPhotos.net Credit: Salvatore Vuono

FreeDigitalPhotos.net Credit: Salvatore Vuono

Mrs Topp,

For several years my wife has operated a group here in Lubbock Texas.  The purpose of the group is to raise funds for our homeschool athletic teams to pay for various aspects of their sporting endeavors.

 The group receives a percentage of sales from concession stands operated at Texas Tech University and are paid by Ovations, the current concessions operator for Texas Tech.   Ovations uses non-profit groups to operate all concession stands.

 We have never sought non-profit status and now Ovations is insisting that we do so or they will no longer use us.

We has always paid each individual working in the stand based on how much time they worked, and given out 1099MISC to those making over the minimum $600.  Those working come from homeschool athletic teams though we do not dictate how the money each receives is spent.

 In reading the IRS website I can see that sports organizations are eligible for non-profit status, but is the way we pay those working acceptable?

 Paul H

Lubbock, Texas

 

Paul,

Your organization sounds like a parent booster club in that you raise funds to support athletic teams. Yes, booster clubs and athletic teams can be 501c3 tax exempt organizations.

The issue of paying parents working a concession stand has come up with the IRS in the past.
Here is a blog post I have written on the topic.
http://homeschoolcpa.com/the-irss-word-on-fundraising-dos-and-donts/
I think the IRS would approve of the way you are paying the parents. Giving them a 1099MISC is the correct way to report their earnings.

You might also find this website ParentBooster.org helpful.

ParentBooster.org offers tax exempt status to athletic booster clubs that support the activities of a school under their group tax exempt status. I asked the founder, Sandy Englund, if homeschool booster clubs would be eligible for 501c3 tax exempt status under ParentBooster.org, but she said no. Maybe you should ask and see if you get a different answer. It would be a very easy way to obtain your 501c3 tax exempt status.

 

 

 

 

Homeschool co-op teachers not returning curriculum. What to do?

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Over at the Facebook page I am A Homeschool Group Leader, Sharon asked the following:

 (our homeschool co-op) has a policy that the teacher is to turn over the curriculum that wasn’t consumed to the board, but that has not been happening. What do you do? If you collect the curriculum, where do you store it?

Shanna offered this advice:  I would let the teachers know that if the group reimbursed them, then it belongs to the co-op. We do collect the curriculum. For years, it set on a book shelf in my office (school room), but I needed the space for my stuff. This year we purchased a cabinet at Lowes & it is now in my garage. I label & number all the books. I keep an inventory in Excel & when a teacher has a book, I write their name next to it in the Inventory.

Peggy added:  If it belongs to the co-op, I would find a way to store it. If you plan to reimburse, perhaps only do partial and say the remaining will come when they turn it in. (This could be cost-prohibitive, however for many.) Otherwise, I would send them an invoice with the amount they owe, or that they can turn in the books.

Patricia had more ideas: We let the teachers know at the beginning of the class that when the class ends they are to turn in any materials that the group paid for. When I receive it from them, I put it in totes labeled “Lending Library.” I post a list on our website of the curriculum that is available for use, and families “check it out” like you would at a public library. They use it for the semester or the year, and return it. This allows the entire group to benefit from the purchases that we have made as a group. I do write our group name boldly on the curriculum, and I put all consumable materials in a binder, and label “Do Not Write In This Book” on the worktext.

Thanks for the great advice and tips!

Carol Topp, CPA

Teacher hired to teach homeschooled children asks about taxes

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I am currently an elementary school teacher who has been approached by parents that want their children home schooled, but would rather have a private teacher do the instructing. How would I file taxes if I chose to go that route?
Marcia

Marcia,

If you are hired to teach homeschooled children, then you are running a sole proprietorship business, much like a private tutor or a music teacher.
You will file taxes on a Schedule C Profit or Loss from Business as part of your Form 1040.

I have several blog posts advising people like you who want to offer services to homeschool parents.
Is it Homeschool or Mary Poppins?
Can I hire a homeschool governess?
Is it legal to homeschool other people’s children?

Good luck!

Carol Topp, CPA

Board turnover may mean the purpose of the homeschool group could change

I am concerned that a regular turn over of the leadership of our homeschool group could result in the vision and purpose of the group changing year to year.

 

A shift away from your original vision and purpose is always a concern, so make sure you never turnover the entire board in a year or do not turn over more than half the board at once.

Also, do some training for new board members. Give them the bylaws and mission statement. Allow them to read minutes from prior board meetings. That way they will understand the purpose and mission of your group.

Additionally,  keep the mission in front of everyone’s eyes at every board meeting. Put it on a poster.  Read it out loud if you have to.

Regular meeting are a good way to remind members of the purpose of your group.

Sad but true story: One homeschool group only held board meetings when there was a crisis (and then those meetings lasted 3-4 hours!). The founder did very little to reinforce the mission and purpose of the group. She assumed everyone on  the board thought like she did.

Imagine her surprise when a board member proposed an idea that was in complete disagreement with the founder’s vision!  The meeting was a horrible experience and ended in the board member resigning. She went on to form a competing homeschool group. It bread ill-will in our homeschool community for years.

I hope that helps,

 

Carol Topp, CPA

How much money can a homeschool group keep year to year?

Is there a cap to how much we can keep in our checking account from year to year as a homeschool support group?

No, there is not a cap on how much money a homeschool support group can accumulate.

While it is prudent to have a small surplus to meet future needs, most nonprofits do not accumulate a lot of money year after year. If you have plans for a big event in the future, then it is acceptable to accumulate funds for a few years. But without a reason to be accumulating money, the funds should be spent on your current members (but always keeping a small reserve).

Here’s a rough rule of thumb: If you have more than one year’s income as a surplus (and no plans for the future use of the money), then you should probably make plans to spent some of it on your current members. If you have 2-3 years of accumulation, it’s time to readjust your dues or plan a big party with all expenses paid! 🙂

Having a budget should help you manage how much surplus you carry forward.

Sad but true story: My support group leader realized she would end the year with a surplus, so she threw a very nice catered dinner for all the members and their husbands. It was a lovely date night with babysitting provided!

Unfortunately, the leader drained the checking account and didn’t realize that the annual insurance bill was due in the summer before she had collect dues from the members! Ouch! She had to ask several members to loan the group money in order to pay the bills over the summer.  Good planning, a budget, and carrying a surplus would have avoided her embarrassing situation.

Cover Money Mgmt HS OrgDo you have a copy of my ebook Money Management in a Homeschool Organization?

It might be helpful to you.

 

 

Hope that helps,

Carol Topp, CPA

Can we start running our homeschool co-op before we apply for tax exempt status?

I am working with three friends to start a homeschool co-op this fall. I purchased your book and read over your website. I can see we may need your services in the near future. For now, however, I just have one question that I couldn’t seem to find an answer to in your material:

I applied for and received an EIN number. I would like to apply for non-profit status with my state and the IRS. However, the $125 and $850 fees are discouraging right now.

My question is this: Can we just start running our co-op before we apply and then save money to apply for non-profit?

And then if the answer is yes, what are we until then for tax purposes…do we have to file taxes in 2013 just as a business and just show $0 profit and $0 taxes owed?

Lynne D in PA

 

 

Lynne,

Great question!

Yes, you can organize and operate as a nonprofit for a while and save up some money to apply for tax exempt status.

The IRS expects nonprofit organizations to apply within 27 months of formation. If you file for nonprofit corporation status in your state, then the day you become incorporated is the date of formation. It is sort of like the organization’s official birth date.

The IRS will grant you tax exempt status from the date you incorporate. It’s kind of like “back dating” your tax exempt status.

You should not consider yourselves as a for-profit business if you are organized (meaning have a board and bylaws) and operate (no profit motive, no one pocketing the profits) as a nonprofit. You can call yourself an “unincorporated nonprofit.” You do not need to file a business tax return.

So, the bottom line is that you can start and run your co-op for about a year, maybe close to two years, and then apply for tax exempt status with the IRS.

I hope that helps!

 

Carol Topp, CPA

Crackdown on using Independent Contractors

This article from Forbes discusses independent contractors and employees.

The Department of Labor is considering requiring businesses (and that would include nonprofits) to give every IC a “Right to Know” document explaining why they are not classified as employees.

 

It would require giving each independent contractor a kind of written Miranda warning notifying the independent contractor about:

  1. The federal tax obligations of an independent contractor;
  2. The labor and employment law protections that do not apply to independent contractors; and
  3. The right each independent contractor has to ask the IRS to determine whether he or she is an employee or independent contractor.

These might affect you if your homeschool organization hires independent contractors. A lot of homeschool co-ops hire teachers as independent contractors.

I’ll keep you posted if these regulations come to pass.

Carol Topp, CPA

Not ready for 501c3 status. What’s an intermediate step?

Hi-

We are in the process of moving toward becoming a 501c3 group but we don’t have enough financial history or the resources to accomplish it right now so we would like to do the intermediate step of becoming a corporation.

We are based in Pennsylvania but I’m not sure what type of corporation we should be, LLC or something else.

We would like to keep it as simple as possible so we can easily transition to a 501c3 down the road. What do you recommend?

Thanks for your help.

Delia in PA

 

Delia,

Your homeschool group sounds like many others that become a nonprofit corporation. Be sure you read my articles before filing for nonprofit corporation status

There is some very specific language that the IRS will expect to see in your nonprofit paperwork (called your Articles of Incorporation) in order for you to receive 501c3 tax exempt status in the future.
See my sample Articles of Incorporation here: http://homeschoolcpa.com/leader-tools/sample-documents/

Don’t delay too long between becoming a nonprofit and filing for 501c3 status. The IRS expects you to file for 501c3 within 27 months of your date of formation (i.e. the date you became a nonprofit corporation)

As for being an LLC, it’s not very common for nonprofits. This blog post will help: http://homeschoolcpa.com/should-my-homeschool-group-file-as-an-llc/

I hope that helps!

Carol Topp, CPA


 

When you are criticized for being a homeschool leader

My (virtual) friend Denise Hyde runs the Homeschool Group Leader blog over at http://hgleaderblog.blogspot.com/

She recently received some criticism for being a group leader. Denise shares how she dealt with the sting offers encouragement to other homeschool leaders.

 

  • First, you don’t take it personally. I know, it’s very difficult! I had to swallow a couple of times, send a prayer-flare, and focus on trying to learn from the problem instead of internalizing it.
  • Then ask a few clarifying questions while you settle your feelings and get a handle on the true cause of the discontent. I started with the fellowship, asking her to describe when she felt left out. Ended up it was on a FYI field trip where everyone took their families through the displays on their own. It was a misconception about the type of field trip. Then I tackled the religious view differences and the homeschool philosophies that she had encountered.
  • As we discussed each one, I realized that most of these were things that I couldn’t change her mind on. At that point, I just reassured her of her welcome, pointed out a couple of things to counter her viewpoint, and let her go.
  • Yes, I ended it. I wished her well, telling her I hoped she would find a perfect fellowship for her and her son. Sometimes that is the best policy. Don’t beg them to stay, or try to fix it perfectly. Let them go with genuine care and kindness.
  • Next, realize what you can learn and improve. Put your energy into doing what you truly can do. Nurture the strengths of the group. Follow your God-given goals for the group and the purpose of your homeschool group.
  • Remember, you can’t please everyone, so again, don’t take it personally!
  • Oh, and yeah. . . . focus on the compliment again! Look at all the families that ARE receiving strength from your group. You are doing a great service! Your ministering IS making a difference.

See the entire post at http://hgleaderblog.blogspot.com/2012/12/best-and-worst.html

Hang in there homeschool group leader! Take Denise’s advice to heart and know that what you’re doing is important work!

Carol Topp, CPA

How can you ask a member to leave your homeschool group?

Hey Carol,
We do not have anything in our by-laws or policies about dealing with a mom in the group whom the board feels must be asked to leave.

 

I have steps in place for dealing with students, but had never even considered an issue with a mom in the group.

 

Joy  from Florida
Joy,
At a homeschool convention this summer, Attorney TJ  Schmidt from HSLDA recommend all organizations have in their bylaws a sentence that states something about membership in the organization can be terminated at any time and without cause.

 

He then advised that if you do terminate a membership, that you NOT give a reason (i.e. cause).  Giving a reason can open up the leadership to headaches, liability, and arguments.

 

I agree completely with Mr Schmidt. If your board decides to ask this member to leave, then do not discuss the reason why with your other members or get in a discussion with the offender about her behavior. Certainly, the board can discuss the “why” but that should not be made public.

 
I know it is tempting to defend yourself, but just say

“We’ve been advised to not discuss publicly sensitive matters such as these. It was a board decision.”

I think that a statement such as “membership in the organization can be terminated at any time by decision of the board and without cause” should be on the registration form that the members sign as well as the bylaws (because the members don’t usually read the bylaws).

I hope that helps!

Carol Topp, CPA