I read your book The IRS And Your Homeschool Organization. What a Godsend! I am the director of a small homeschool academy in Missouri. We are in the process of deciding whether to do a 501(c)(3) or not. My board has two questions.
1. You state the IRS filing fee is $850 (Update: IRS lowered its fee to $600). That may be a struggle for us. Would there be a cost savings to just file income taxes? You mentioned a 15% corporate tax (The corporate tax rate was changed in 2017 to a flat rate of 21%). We have been a non-profit corporation since 11/04/11.
2. Would taxes have to be paid on years prior to 2011….whether we file or not? We have had a gross income over $5,000.
Diann
Dear Diann,
Thank you for contacting me and your kind words!
1. Some nonprofits find it cheaper to pay taxes at 15% 21% of their profit than the IRS filing fee. That’s a shame! Of course the $850 $600 IRS filing fee is one time only, taxes go on forever. 🙁
The corporate income tax form is Form 1120. The corporate income tax rate is 15% 21% of your profit. State tax rates for corporations vary from 1 to 12%
Additionally, you will not receive other tax exempt benefits such as sales tax exemption, ability to accept tax deductible donations, and participation in fund raisers like Box Tops for Education without 501(c)(3) status.
2. Taxes will have to be paid from your date of incorporation, which in your case was November 4, 2011. You’re already late in filing a corporate income tax return, Form 1120, for 2011 (or whatever you fiscal year is). You’re probably be late for 2012 too! Since you never applied to be tax exempt, your organization could owe back taxes.
The IRS allows 27 months after date of formation (incorporation) to apply for tax exempt status and be back-dated to your date of formation. So if you apply for tax exempt status before February 4, 2014, you will be tax exempt and not owe any income tax. Better hurry!
Diann found my book The IRS And Your Homeschool Organization helpful. You might too!
Carol Topp, CPA
HomeschoolCPA.com