Does a homeschool group need a business license?

I recently just purchased business contents insurance for my nonprofit homeschool organization and the agent asked if we have a license to do business in Pennsylvania? This isn’t something that I had come across in research I wasn’t sure if we were required to obtain a business license. I know it wasn’t on the PA requirements you had sent us.

Thanks

CS in PA

Dear CS,

You asked if your homeschool group needs a business license in PA. Your insurance agent asked if it has a “license to do business in PA.”

1. Let me start with the idea of your group’s right to do business in PA or what is usually called “registering” a business in PA. Most states want businesses to register so that the state can collect taxes from the business.

For example, businesses  in PA (but remember that nonprofits are not businesses) must file a 14 page PA Form PA-100 to be assigned various tax accounts in PA. This link explains that PA-100 is used to get a sales tax ID number, pay employer taxes, get a Resellers permit,  pay Use tax, and for businesses selling certain products that PA taxes like cigarettes, alcohol, fuel, hotels, etc.

In your case only two of the taxes apply: sales tax exemption and employer taxes. HomeschoolCPA provided the information on sales tax exemption in a letter to you explaining PA required filings (I provide this service for homeschool organizations. Details HERE) . I did not supply information about employer taxes, because I assumed that your payroll service will help you get an PA employer tax ID when they set up your payroll.

So your homeschool group is registered in PA as a nonprofit corporation. That’s your right to do business in PA. That happened when you filed the Articles of Incorporation.

2. Now as for your homeschool group needing a business license: Most nonprofits don’t need a business license. They are not business. They may need to register their existence and right to do business, but your organization did that when it incorporated in PA, as mentioned above. And only some businesses need a license to operate. Lawyers, accountants, nurses, barbers, real estate agents, are examples of occupations (and businesses) that need to be licensed. None of these occupations or businesses apply to your organization. IOW, your homeschool nonprofit doesn’t need a business license to operate.

So the way to answer your insurance agent’s question is: Our homeschool organization is registered as a nonprofit corporation in PA and we do not meet the requirements to need a business license in PA because it is not a business and does not involve any of the occupations that require licensing in PA.”

To be honest, your insurance agent probably works with small businesses so much that he/she may have forgotten that your group is a nonprofit. And (s)he’s probably not very familiar with the registration (and licensing) requirements for nonprofits in PA.

P.S. I checked several reputable sources for checklists of forms that nonprofits need to file in PA including Nolo.com, Northwest Registered Agent. They did not mention registering as a business (Form PA-100) nor did they mention licensing in PA for nonprofits. That was as I expected.

I hope that helps!


If you have questions about starting or running your homeschool organization, contact HomeschoolCPA. We can arrange a phone or video (Zoom) consultation or reply to emails for a reduced fee.


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Homeschool Groups: Prepare for new 1099-K reports if you use Paypal, Stripe, Venmo, etc.

Lots of homeschool groups use Paypal, Venmo, Stripe, Square, etc. and other third party payment processors to collect dues and fees. That’s a great way for your group’s families to pay the organization easily.

For 2022, these third party payment apps will start sending everyone who receives more than $600 though their service a tax form called a 1099-K and a copy goes to the IRS. This means that your homeschool group will receive a 1099-K in early 2023 showing all the funds (if greater than $600 in the previous calendar year) that flowed through Paypal, Venmo, etc. and a copy goes to the IRS!

Here’s the law itself (scroll to page 94 of the 114 page pdf). It is part of the American Rescue Plan Act of 2021. The new rule is effective beginning on January 1, 2022. President Biden signed the law with the threshold amendment in March 2021.

What to do with a 1099-K when it comes in early 2023?

If your organization is a tax exempt, nonprofit AND your payment account is set up under the organization’s name AND uses the organization’s EIN (Employer Identification Number) as their tax ID, you have nothing to worry about!

You should simply give the 1099-K to the treasurer or your bookkeeper and she should check the amount for accuracy. Then file it away. Your tax exempt organization should be filing an annual IRS Form 990/990-EZ/990-N with the IRS every year. The amounts on the 1099-K will be included in the total revenues on this 990 Information return. But you will not owe additional tax on this money, because your organization has tax exempt status. 🙂 The IRS Form 990/990-EZ/990-N are information returns for tax exempt organizations, not tax returns.

How do I know if my Paypal, Venmo is in the organization’s name?

Log onto your third party payment processor. Go to Settings>Account Information and click around until you find a Tax ID section or Identity Verification (on Venmo). Also look for Account Type. In PayPal and Venmo you should have a Business Account, not personal account for your homeschool group.

How do I know if my group is a tax exempt nonprofit?

Look up your organizations name in the IRS Exempt Organization database. https://apps.irs.gov/app/eos/

Here’s an example from a charity I serve as treasurer:

When I click on the hotlink of the organization’s name I learned a few more details and see that this organization is update date with filing annual IRS reports.

If your organization is not listed or it says Revoked with a date, your homeschool group is not tax exempt and must correct that immediately. Start by reading the blog posts and contact HomeschoolCPA to apply for tax exempt status or get tax exempt status reinstated if it expired.

How do I know if we are using the organization’s EIN as our tax ID?

Log onto your third party payment processor. Go to Settings>Account Information and click around until you find a Tax ID section or Identity Verification (on Venmo). In PayPal and Venmo you should have a Business Account, not a personal account for your homeschool group.

What if our Paypal account is a person’s name?

Well, now you have a problem! Paypal (I’m using Paypal generically to mean any payment processor) thinks this account belongs to an individual and he or she will get the 1099-K. A copy goes to the IRS and the IRS will expect to see this money reported on that person’s individual tax return! Expect to get a panicked call from this individual! She will probably have to hire a professional tax preparer to help her report this money (which is not really hers) and deduct any expenses, so she avoids a large tax bill. She will be very unhappy with your organization!

How to check your Paypal account: In Paypal go to Account Settings>Business Profile> Account Owner Information. Look under the Tax ID. There should be a number for the EIN, but NOT for SSN. That’s how it should be!

If your Paypal account is in someone’s SSN, change that immediately. You may need to contact Customer Service. They will want verification of your EIN (the IRS letter you received when you applied for your EIN) and perhaps other documents such as proof you are a nonporift and tax exempt with the IRS. If you do not have these documents, Paypal will likely close your account. So empty the cash first and create a new Paypal account under the name and EIN of your organization.

Here’s what to do NOW in the last weeks of 2021:

  1. Log onto all your third party payment processors (Paypal, Venmo, Zelle, etc). Verify that all the accounts are in the name and EIN of your organization. Verify that the address is up to date too. Take screen shots and save them permanently.
  2. Fix any incorrect information on the third party processor accounts. Take screen shots and save them permanently..
  3. Call the third party processor customer service if you have any problems updating your information online.
  4. Don’t have tax exempt status? Contact HomeschoolCPA to apply for tax exempt status. Start by reading these blog posts:

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Maintaining your tax exempt: IRS virtual workshop

I’ve attended lots of training by the IRS for nonprofit and tax exempt organizations. They are usually informative, but a little dull. The IRS training modules (videos, virtual workshops, live and virtual conferences, and lots of documents) apply to all sorts of nonprofit organizations, large and small. That’s why I created books, podcasts and webinars specifically for homeschool nonprofits.

But I recently found a few IRS training videos that were pretty good! One in particular on maintaining your tax exempt status was informative, interactive and easy to follow. This virtual workshop runs for 30 minutes and covers:

  • The IRS Form 990 annual exempt organization returns
  • Record keeping needed to prepare the Form 990
  • Unrelated business income tax filings
  • Public disclosure requirements
  • Prohibited political activities
  • Private benefit and inurement

I am asked about these topics all the time, so now you can get the information from the source: the IRS!

Maintaining Your Tax Exempt Status (IRS virtual workshop)

(if you’d rather read this information, a transcript is provided as well)


The IRS website called Stay Exempt has lots of other virtual workshops for small and medium-sized organizations. Click on any topic on the top menu that fits your circumstances such as Starting Out or Existing Organizations.

I think you will find them helpful and worth your time.

If you find any of the IRS information confusing and wonder if it applies to your homeschool group, please contact HomeschoolCPA. We can arrange a phone consultation or Zoom meeting to discuss your particular situation.


Carol Topp, CPA

HomeschoolCPA.com

How the IRS sees homeschool groups (podcast)

IRS and homeschool groups

UPDATE: This podcast episode originally aired in 2015. But it is still accurate and helpful in 2021, 6 years later!

In this episode of the Dollars and Sense Show podcast, host Carol Topp continues her topic “Who’s Afraid of the IRS?” and discusses how the IRS sees homeschool co-ops, nonprofit incorporation, for-profit homeschool groups, and what happen when a nonporift loses its 501(c)(3) tax exempt status.

Listen to the podcast

Listen to the first part of this presentation where Carol discussed homeschool support groups as IRS 501(c)(7) Social Clubs and co-ops as 501c3 Educational organizations.

Get a copy of the handout.

More information

Carol mentioned the article “Do You Know About IRS Required Filings for Homeschool Organizations?” Get it here.

Carol’s book, The IRS and Your Homeschool Organization, is available here.

The IRS and Your Homeschool Organization

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Who’s Afraid of the IRS? (podcast)

IRS and homeschool


UPDATE: This podcast episode originally aired in 2015. I am amazed at how accurate it still is 6 years later!


Are you afraid of the IRS? Should you be?

How does the IRS see homeschool organizations?

In this episode of the Dollars and Sense podcast, host Carol Topp, CPA discusses how the IRS sees homeschool organizations. Carol discusses homeschool support groups as IRS 501(c)(7) Social Clubs and homeschool co-ops as 501(c)(3) educational organizations.

Listen to the podcast here

Get a copy of the handout Who’s Afraid of the IRS Handout

More information

The second part of this podcast presentation, “How the IRS sees homeschool groups”

Carol mentioned the article “Do You Know About IRS Required Filings for Homeschool Organizations?” Get it here.

Carol’s book, The IRS and Your Homeschool Organization.

The IRS and Your Homeschool Organization

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Ideas of easy fundraisers for homeschool groups

DSS#30Graphic

UPDATE: This podcast episode originally aired in 2014, but it is still very applicable in 2021, except that Box Tops has now gone digital! No more clipping coupons. 🙂



Your homeschool organization probably looks for extra ways to bring in money. Carol Topp, the Homeschool CPA, shares ideas for easy fundraising in this episode of the Dollars And Sense Show podcast.

Listen to the podcast here

Show Notes

Coupon and reward programs
Box Tops for Ed cation. Need 501c3 status
Shopping reward like Kroger Plus program
E Scrip

Food as a fundraiser
Pizza sales, bake sales to members
Candy, popcorn sales to public could impose a reporting to you state’s AG office
Restaurant (Chik-Fil-A) give a percent of proceeds from one night to your organization
Dinners as fundraisers

Donations
Via email, website, crowd funding, etc
Read-a-thon or walk-a-thon
Car washes and bake sales

Sell products
Ideas at TopSchoolFundraisers.com
Used curriculum sale. Charge an entrance fee, or a table fee to the sellers (or both!)

Reporting the Fundraiser income:
The IRS considers fundraisers to be unrelated to your nonprofit purpose and therefore, subject to taxation. Exceptions to the Unrelated Business Income tax:

  • Under $1,000 income from fundraisers in a year
  • All volunteer labor (no hired help to run the fundraiser)
  • Not regularly carried on
  • Selling donated items

State Charity Registration for fundraisers

Your state may require reporting to their Charitable oversight agency (usually the state Attorney General) if you sell to the public or solicit donations from the public. Some exceptions to registering with your state include: only making sales to your members, a dollar threshold ($25,000 is common), using all volunteer labor for your fundraisers. These exceptions vary by state.

Unsure about what reports your state requires or what exceptions you qualify for? HomeschoolCPA offers a service to research your states laws and required reports. IRS and State Filings Research

Here’s a helpful link to start researching what your state requires. Fundraising Compliance Guide

Warning: No Individual fundraising accounts!
See Scouts don’t allow individual fundraising account (and neither should you!)

More information

Money Management in a Homeschool Organization book

Blog posts on fundraising

Article “Easy Fundraisers for Homeschool Groups”

Unsure about what reports your state requires? HomeschoolCPA offers a service to research your states laws and required reports. IRS and State Filings Research

Money Mgmt HS OrgCover

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Paying Workers in a Homeschool Organization Part 2 podcast

DollarsSenseShow18

UPDATE: I aired this podcast originally in 2014, seven years ago. It’s still very useful and paying workers is a topic that come up frequently for homeschool group leaders. I’ve updated this blog post with a few changes of IRS forms and links.

Do you pay workers in your homeschool organization?

Do you know what form to to filing with the IRS?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 2 of a 2 part series.

Listen to the podcast

Be sure to listen to the first part of this podcast (Episode #17) where Carol explains the difference between employees and independent contractors.

Show Notes:

Applying for EIN. Use IRS Form SS-4. Read this helpful article first Getting an EIN from the IRS. (updated link)

IRS forms to give to independent contractors (IC).

  • Use IRS Form W-9 to collect the IC’s legal name and EIN.
  • Read IRS Pub 15A Employers Supplemental Tax Guide.
  • Give Form 1099-MISC (UPDATE: as of Jan 2021, the Form is now 1099-NEC Nonemployee Compensation) to every IC paid more than $600 in a calendar year. Unfortunately Form 1099-MISC (now 1099-NEC) cannot be printed on your home printer. You must order them from the IRS or buy a set at an office supply store. I use FileTaxes.com (now called Yearli.com) to file and mail Form 1099-MISC. Yeali’s fee is now $5.50-$6.50 per 1099-NEC. (2021)

IRS forms to give to employees

  • Collect a W-4 and an I-9 (Immigration) from each employee. Get employment forms at IRS.gov
  • Read IRS Pub 15 Employers Tax Guide
  • Give each employee a W-2 at the end of the year. (I recommend Yearli.com to file and mail the W-2’s to employees)
  • Form 941 or 944 to pay your employer taxes (Social Security and Medicare). Find employment forms at IRS.gov.  I use Yearli.com to prepare and file 941/944.

What to do if you are paid by homeschool organization an receive a 1099-NEC?

  • File Schedule C Profit or Loss from Business of the Form 1040. List all your income and expenses from being a independent contractor.
  • Pay federal income tax and  self-employment tax (same as Social Security and Medicare for self-employed people) using Schedule SE (attached to your Form 1040.

Helpful Resources

Money Management in a Homeschool Organization

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization

And if you are a workers in a homeschool organization and receive a 1099-NEC or need to report your earnings even without an 1099-NEC, this ebook will be very helpful:
Taxes for Homeschool Business Owners


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Paying Workers in a Homeschool Organization Part 1 podcast

DollarsSenseShow17

UPDATE: I first aired this podcast episode in 2014, 7 years ago! How to pay workers is still a common question and issue faced by homeschool groups leaders, so I am updating this post (mostly about my book Paying Workers in a Homeschool Organization which is now a full fledged 130 page book). The podcast is the original from 2014. An oldie, but a goodie!


Do you pay workers in your homeschool organization?

Are they employees or independent contractors? Do you know the difference?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 1 of a 2 part series.

Listen to the podcast here.

Be sure to listen to the second part of this podcast when Carol shares what forms you need to be filing with the IRS when you pay workers.

Helpful Resources

Carol mentioned a few helpful resources:

Paying Workers in a Homeschool Organization 

Money Management in a Homeschool Organization


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Is Paypal a good option for a 501c3?

Our homeschool group is currently looking into using Paypal so that we can collect membership dues online. We had a few questions we hoped you could answer.
Is Paypal a good option for a 501c3?
Would using Paypal affect tax paperwork in any way?
Paypal charges a transaction fee. Does it make a difference whether we ask the individual to pay the fee or whether we pay the fee out of our budget?
Is there an online payment method that you would suggest other than Paypal?

Jessica B.

Jessica,

Lots of nonprofits use Paypal. It is a secure, convenient way to collect fees. Using Paypal or other electronic payment system doesn’t affect your “tax paperwork,” the annual IRS Form 990/990-EZ/990-N, reporting in any way. Just treat Paypal like a checking account. Money comes in, fees are paid out, and transfers go out to your bank checking account.

Reduced PayPal fees for 501c3 nonprofits

If you send Paypal your 501c3 determination letter from the IRS, they will reduce the fee from 2.9% to 2.2%.

It doesn’t matter if you increase your fees to cover the Paypal fee or just pay it out of your budget. It’s part of the cost of doing business. What is not allowed is to charge customers who uses Paypal more than those who pay in cash or by check. So you may have to increase the fees to everyone to cover the Paypal fees.

Alternatives to PayPal

I looked into other online payments for nonprofits. Some let you ask the donor/payor to pay the fee, but then they charge 4% or a high monthly fee which is not affordable for most small nonprofits.

I’m the treasurer for a charity (a food pantry). We request donations of $100 or more by by check to avoid giving Paypal too much in fees. One donor gave $1,000 via Paypal and we paid $22 in fees!

In my business I use Quickbooks Merchant Services when I have a large invoice (like $200 or more) to send to a client. I only accept payment by check or ACH (echeck), not credit card with QuickBooks. QuickBooks only charges $1.00 per ACH transaction. That’s a lot less than Paypal’s 2.9%.

I also use Stripe in my business, which is a lot like Paypal. I let clients pay me via Stripe if it’s under $100. I just “eat” the fee. I don’t increase my invoice if they want to pay with a credit card. But I wish more paid by echeck/ACH. Stripe only charges 0.8% for an ACH transaction. A lot less than 2.9%. https://stripe.com/blog/accept-ach-payments
So if your group’s membership fee is high, ask for payment by check or ACH, maybe via Stripe or Paypal. 

Please avoid using platforms like Zelle, Venmo or PayPal Friends and Family to avoid paying fees. These are for non-business money transfers only.

Instead pay the fees and be glad that these services exist. They allow for a convenient way to get paid securely and we shouldn’t expect a service like Paypal to be free all the time.

If you have more questions about managing money in a homeschool organization my book may be very helpful.
Money Management in a Homeschool Organization

I hope that helps.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Former CC Director explains the liability that she carried as a Director

Colleen Eubanks shares a video review of Classical Conversations. She was a tutor and Classical Conversations Licensed Director for two years.

About the 13:30 mark (roughly half way), she clearly explains some of the liability that she carried as a Licensed CC Director. Her concerns include:

  • Paying tutors as employees or Independent Contractor
  • Not being hired as an employee when a Director
  • Securing a facility to meet and being responsible to the building
  • Potentially jeopardizing the church’s property tax exemption by operating her for-profit business in a church

Since Collen owned another business in addition to directing a CC Community, she knew about employees and Independent Contractors. She also consulted her CPA in running her CC Community business. Smart woman!

She explains her concerns clearly and factually. All CC Directors should be aware of the liability they carry so they enter into a licensing agreement fully aware of these issues.

I hate to hear stories of CC Directors not being aware of the fact they are running a business! And it’s very unfortunate when a church learns that a business has been operating on their property and asks the CC Community to leave. That gives homeschool groups a bad reputation with churches.

Listen to her comments at the 22:20-23:16 minute mark. She encourages CC Directors to fully understand the kind of business they are setting up and that just because it is a low-profit (or no profit) business does not make it a legitimate, nonprofit organization.


Are you considering converting your CC Community from a business to a legitimate nonprofit organization?

My webinar on Create A Nonprofit for Your Homeschool Community can help. It’s only $10 and runs 90 minutes. Typically you would pay $150 for an hour and a half of my time, so the webinar is a bargain.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders