What Homeschool Leaders Don’t Know About Losing Tax Exempt Status

What Homeschool Leaders Don’t Know About Losing Tax Exempt Status

Carol Topp, CPA, the HomeschoolCPA will share tips on important issues that homeschool leaders may not know about. This episode will focus on helping homeschool leaders know what to do if their organization has lost its tax exempt status.

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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!

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What Homeschool Leaders Don’t Know About IRS Annual Reports

 

What Homeschool Leaders Don’t Know About IRS Annual Reports

Carol Topp, CPA, the HomeschoolCPA will share tips on important issues that homeschool leaders may not know about the IRS Annual Reports. This episode will focus on helping homeschool leaders understand a report that the IRS requires from all tax exempt organizations–including your group! It’s called the Form 990.

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Carol Topp, CPA can help with:

Preparation of IRS Annual Return

Preparing the Form 990/990-EZ Annual Information Return for the IRS and your state. The Form 990/990-EZ is due 4 1/2 months after the end of your fiscal year.

This service involves several telephone calls and e-mails and copy of your financial statements (a QuickBooks file is preferred).

I also offer a service I call “Buying Peace of Mind”

This is a a review of IRS forms you have prepared yourself. You can save money by doing much of the work yourself. I will review Forms 1023 or Annual Form 990/990-EZ and offer my opinion and advice.

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Wow Carol!  Thanks so much – just the info you provided here is very helpful.  I look forward to speaking with you as I’m anxious to get started, but I want to do so in the best and most efficient way.  This is new territory for me – so I truly appreciate your guidance!

-Laine Discepoli, Glendale, OH

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Click Here to request more information!

 

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What Homeschool Leaders Don’t Know About Non Profit Status

Carol Topp, CPA, the HomeschoolCPA, will share tips on important issues that homeschool leaders may not know about.

This episode will focus on helping homeschool leaders understand nonprofit status for their groups. What does it take to be a nonprofit? Only two things! Did you know that nonprofit status is not the same thing as tax exempt status?

 

Listen to the podcast

 

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

HomeschoolCPA.com

Helping homeschool leaders with legal and tax issues

 

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Overwhelmed by QuickBooks? Help is available.

QuickBooks is a great accounting software package, but it can be overwhelming. I have some suggestions to help you learn QuickBooks or get the help you need to use it correctly.

TechSoup (the program that offers QuickBooks online for free to nonprofit organizations) offers videos:

QuickBooks for New Nonprofit Users

QuickBooks for Existing Nonprofit Users a more advanced video

Techsoup also has some blog posts on QuickBooks.

Running QuickBooks in Nonprofits by Kathy Ivens is a great book. My go-to-referral for all things QuickBooks.


The resources listed above are helpful, but they are not specific to homeschool organizations.

I can recommend some homeschool moms and dads with bookkeeping experience who can help you. They know QuickBooks and have experience with homeschool organizations. These wonderful bookkeepers can help you get setup (that’s the hardest part), do a monthly or quarterly check up to see if you’re using the software correctly, or fix your QuickBooks file if you’ve blundered it up.

Email me to get a recommendation of a homeschool-friendly QuickBooks expert.


Carol Topp, CPA

HomeschoolCPA.com

 

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Board members who won’t do anything

 

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I hear from a lot of homeschool leaders that they have board members who don’t do much. How frustrating.

Here’s some advice:

Do something. The problem is likely to get worse and a board member who is not participating can demoralize the entire board.

But stay hopeful. Many board members need a reminder to be more conscientious. You’re all in this together. Some inactive board members may need to be let go. They may be grateful that you’ve given them a graceful way to reduce their work load or even leave the board.

  • Check to be sure that expectations were made clear to the board member before he or she joined the board. “I know you joined the board recently and I’m not sure that you realize that we ask all board members to attend the annual dinner and, hopefully, to help sell tickets. Let me explain to you what most board members do, so you can see whether you’ll be able to work on this with us.”

Here’s a good list of Requirements of Board members.to get you started.

  • Hold a board discussion at which expectations are reconsidered and reaffirmed. Agree on a list of minimal expectations for every board member, and ask people to suggest how they might individually help as well.
  • Be sensitive to possible health issues or personal reasons why a good board member isn’t participating as much as he or she has in the past.

Remember, homeschool leaders carry a lot or responsibility. Your inactive member may be having health, marriage, or parenting problems that she is not sharing with you. Show grace and compassion and she may be so grateful for your support that she becomes active again.


Sorry, but the rest of this content is available only to my email subscribers! I know that’s a little bit sneaky, but I want my email subscribers to get special content like this list of steps to help an inactive board member.

Subscribe to my email list and get helpful tips for dealing with a board member who won’t do anything as well as special reports, discounts and and helpful resources that I don’t share on my blog or website.

 

 

 

My book, Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out also has helpful advice in picking board members, managing volunteers, and running a successful homeschool organization.

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Carol Topp, CPA

HomeschoolCPA.com

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How to account for a surplus in your nonprofit records

Female hand counting money on computer keyboard calculator.

 Does your homeschool organization end the year with a surplus? Congratulations! Now, how do you record that surplus in your bookkeeping.
Currently we are carrying money over into this year from last year. This money doesn’t have a name, we have it on a line that says, “Balance Carried Forward from 2015-2016” in our income column. Should this be called “Starting Balance,” or should this be named something else?
In our next two budget years, we will have a surplus. We are unsure what to call this surplus money. We do have a reserve fund already set up in  our budget; would this be the place to put the surplus money and then carry that reserve fund over to the income/expense section year to year?
Thank you so much for all your help!!
Heidi R in PA

Heidi,

You’ve hit on something very basic in accounting: how to account for accumulated money (aka a surplus).

The surplus is not income for the year so it should not be added to your other sources of income. The surplus is really an asset. It is cash sitting in your checking account.

Accountants created a special financial statement called a Balance Sheet to list the assets and liabilities. For nonprofits, it’s called a Statement of Financial Position, which I like better as a name.

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I recommend you create a mini balance sheet/Statement of Financial Position to the side of your income and expenses statement. Put the bank balance as of a certain date. List any liabilities (debts you owe) too. Make a note of the cash in the bank that is set aside as your reserve fund.

Your reserve fund is not an expense. It is an asset (cash in the bank). It should be mentioned in a note on the Statement of Financial Position as a reminder to your board that although the money is in the bank, it’s not supposed to be spent.  It’s held in reserve for emergencies.

Cover Money Mgmt HS Org

I give examples of financial statements including the Statement of Financial Position in Chapter 4 of Money Management in a Homeschool Organization

I hope that helps,

Carol Topp, CPA
HomeschoolCPA.com
Helping homeschool leaders

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Accepting in-kind donations of equipment or services

Carol,

My homeschool group (a 501c3 nonprofit) was donated $500 in science equipment. How to I record a gift like this in my record keeping? We use QuickBooks.

 

How wonderful to receive such a generous donation. As a 501(c)(3) tax exempt organization the donation is a tax deductible contribution for your donor.

Thank the donor

First, be sure to thank the donor with a nice letter. State what the donation was (science equipment) but not the dollar amount. Only state the dollar amount when the gift is cash.

And be sure to include this note: “No goods or services were provided in exchange for this donation.”

Understand in-kind donations

A contribution that is paid or given in goods, commodities, or services instead of cash is called an “In-kind” contribution.

Free Church Accounting offers some great information on accepting and recording in-kind donations for small nonprofits like homeschool groups.

There are typically three categories of in-kind donations. They are

  • contributions of tangible and intangible goods
  • use of property
  • donations of services

Tangible gifts in-kind (physical goods that can be touched or held) include: furniture, equipment, food, clothing, supplies.

Example: The donation of science equipment is a tangible in-kind contribution.

Intangible gifts in-kind (goods have value but do not have a physical presence) include: trademarks, copyrights, patents, royalties, advertising.

Example: If a member of your homeschool group lets you print copies of her book or curriculum at no cost she has granted you an in-kind contribution of her copyright.

Use of property include free leased space and discounted rent.

Example: A church lets your homeschool co-op use their building for free.

Professional services given as gifts in-kind include services of accountants and bookkeepers, lawyers, plumbers or electricians, computer programmer, designers, technical support, etc.

Example: One of your members is an attorney and created bylaws for your organization.

Recording donations of in-kind contributions

Some small homeschool organizations don’t record in-kind contributions at all because they do not have to report financial statement to the IRS (they file the Form 990-N) or don’t use accounting software.

But if you would like to record your in-kind contributions in your accounting software here are a few examples from Free Church Accounting

An accountant donates 5 hours a month to do some accounting work that your organization would have had to pay another accountant to do. She regularly charges $100 per hour to do a similar service. To record this gift in-kind you would:

  • Debit Professional Service In-Kind $500
  • Credit In-Kind Contributions $500

Important reminder: Thank your donor for their services, but do not give them a tax deductible receipt for the value of their services. Donors cannot take a deduction for the time that they donated. Only donations of cash, tangible and intangible goods are tax deductible, not the value of services.


A business donates a portable building valued at $12,000. Assuming that your organization has a policy to capitalize assets of this value (meaning you depreciate the value over several years), you would record this gift in-kind like this:

  • Debit the fixed asset account (Portable Building In-Kind) $12,000
  • Credit the In-Kind Contributions $12,000

A person donates an computer valued at $400. Assuming that your organization has a policy to expense assets of this value (meaning you do not depreciate it; you deduct the full amount as an expense in one year), you would:

  • Debit the Equipment In-Kind (expense account) $400
  • Credit the In-Kind Contributions $400

 

Have more questions about properly recording your income, expenses and contributions? My book Money Management in a Homeschool Organization can help.

Or contact me to get help with your accounting set up and transactions. I can refer you to a cadre of homeschool parents with experience in bookkeeping.

Carol Topp, CPA

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Use Quickbooks online for free

I encourage my nonprofit clients to use QuickBooks online (or other online accounting software) and now qualified nonprofits can use QuickBooks online for FREE!

TechSoup, a charity that arranges free or discounted software for nonprofit organizations, offers

One year subscription to Quickbooks online for up to 5 users.

Do this NOW!

If you manage bring in than $20,000 in revenues per year I recommend you start using accounting software. If you have more than $50,000 in revenues in a year I HIGHLY recommend you start using accounting software and Quickbooks online is an excellent choice.

Make it a New Years resolution for 2017 to start using accounting software and be a better money manager of your homeschool organizations finances.

Lots of homeschool parents are depending on you to run your organization successfully.

The advantages are huge:

  • Multi-user so you don’t overburden one person with all the record keeping. Even a bookkeeper or CPA (like me) can log in remotely (with your permission).
  • Online backup so nothing is lost.
  • Email invoices so you can easily track who still owes you.
  • Create reports that show how much money has been spent.

Help is available

Are you afraid of accounting software? It can be complicated, but Tech soup offers some helpful videos.

Or if you prefer more personal help I can recommend some homeschool moms and dads with accounting and bookkeeping experience who can help you. They know QuickBooks and have experience with homeschool organizations. These wonderful bookkeepers can help you get setup (that’s the hardest part), do a monthly or quarterly check up to see if you’re using the software correctly, and answer questions you have.

Email me to get a recommendation of a homeschool-friendly QuickBooks expert.


There are a few catches to TechSoup’s free program:

  • You need to be a qualified nonprofit organization, that means nonprofits with 501(c)(3) tax exempt status.
  • You need to re-subscribe each year, but the renewal fee is free.

What have you got to lose?

If you don’t take advantage of this offer please tell me why in the comments or email me. I want to understand your concerns or obstacles.

Carol Topp, CPA

 

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Do the new overtime rules affect homeschool groups?

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The US Department of Labor (DOL) proposed new rules about paying workers overtime. Several people have asked me if homeschool organizations have to follow these new rules.

My answer is that yes, in general, homeschool organization whether nonprofit organizations or for-profit businesses have to follow the rules in the Fair Labor Standards Act (FLSA) regarding minimum wage and overtime.

But occasionally, there are exceptions, so read on!

New Overtime Rules

The new overtime rules were supposed to take effect December 1, 2016. (They been held up by an injunction by a federal judge). The new proposed rules raise the threshold for when an employee is exempt from getting paid overtime. If your employee makes less than $47,476/year, you must pay them overtime at time-and-a-half when they work more than 40 hours a week. The threshold used to be only $23,660/year, so this was a big jump. Under the new proposed rule many more workers are eligible for overtime.

The impact on nonprofits and churches of paying overtime could be huge since many of their employees put in more than 40 hours a week. They work long hours because they are passionate about their mission. Fortunately, the Department of Labor has an exception to the FLSA for nonprofit organizations.

Exceptions to New OT Rule for Nonprofit Organizations

Here’s an except from”Overtime Final Rule and the Non-Profit Sector” a paper from the US Department of Labor available at https://www.dol.gov/sites/default/files/overtime-nonprofit.pdf

the FLSA applies to businesses with annual sales or business of at least $500,000. For a non-profit, enterprise coverage applies only to the activities performed for a business purpose (such as operating a gift shop or providing veterinary services for a fee); it does not apply to the organization’s charitable activities that are not in substantial competition with other businesses. Income from contributions, membership fees, many dues, and donations (cash or non-cash) used for charitable activities are not counted toward the $500,000 threshold.

Let me unpack that for you.

If your nonprofit has less than $500,000 in “business” income (that does not count your contributions, membership fees or dues), then your organization is not covered under FLSA and you do not need to comply with the overtime rules.

Here’s an example from a longer DOL document, “Guidance for Non-Profit Organizations on Paying Overtime under the Fair Labor Standards Act.” available at https://www.dol.gov/whd/overtime/final2016/nonprofit-guidance.pdf

A non-profit animal shelter provides free veterinary care, animal adoption services, and shelter for homeless animals. Even if the shelter takes in over $500,000 in donations in a given year, because the shelter engages only in charitable activities that do not have a business purpose, employees of the animal shelter are not covered on an enterprise basis.

By “not covered on an enterprise basis,” the DoL means the FLSA does not cover the workers and they are not entitled to overtime.

A lot of homeschool nonprofit organizations just breathed a sigh of relief. They rarely have business income and it almost never exceeds $500,000, so they do not have to pay their employees overtime.

Warning: It’s not as simple as it seems!

This issue is not as simple as saying, “My nonprofit doesn’t have $500,000 income, let alone “business” income, so we don’t have to pay any employee overtime.”

I urge you to read the DoL documents I mentioned above and consult with an experienced professional familiar with employee laws and the Fair Labor Standards Act in particular.

The Kentucky Nonprofit Network offers a helpful 9-page report on steps to take if your nonprofit is affected by the new overtime rules (when and if they go into effect).

Carol Topp, CPA

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Can a homeschool group pay a volunteer?

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This is an excerpt from my update book, Paying Workers in a Homeschool Organization

“Can we pay our homeschool co-op director? She works so hard.”

Yes, your homeschool organization can pay someone who works for the organization, but the pay must be reported to the Internal Revenue Service (IRS). The reporting responsibility will be on both the homeschool organization and the worker. Additionally, the organization will have to determine of the worker is an employee or an independent contractor. Other chapters in this book explain the required reporting and worker classification.

Instead of paying a worker, your homeschool organization can show appreciation to a volunteer in a variety of ways, but they may have tax consequences such as:

  • Reduced fees or tuition. Reduced tuition for classes or for a homeschool co-op fee is a nontaxable fringe benefit if it is insignificant (more on that in the book). If the tuition reduction is significant the value of the tuition is taxable income to the volunteer.
  • Gift cards, but they could be taxable income to the recipient if the cards are a replacement for payment for services and not a true gift.
  • Non-cash gifts such as flowers, books, a coffee mug or chocolate are excellent ways to express appreciation and are tax-free to the volunteer.

I’ll discuss each of these types of compensation (reduced fees, gift cards and non-cash gifts) to a volunteer in detail … (you’ll need to buy the book to read the details!)

Carol Topp, CPA


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Paying Workers in a Homeschool Organization-2nd edition

$9.95 paperback
130 pages
Copyright 2017
ISBN 978-0-9909579-3-5

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