Stuck inside doing your taxes?

Are you stuck inside because of illness, social distancing, or the corona virus?
Well, it’s a good time to work on your tax return!
(Not what you wanted to hear, I’m sure!)


I hear from lots of CC Directors and tutors about their taxes. It can be confusing running a business, paying tutors, etc.

If you’re confused about takes, I have a book for you!

I am pleased and proud to announce my latest book, Taxes for Homeschool Business Owners!
Read more here.

I have spoken and emailed with so many CC Directors, tutors and teachers at homeschool programs that are confused about their taxes. This is my attempt to keep you out of trouble with the IRS!

This ebook is a great resource for:

  • Tutors or teachers for a homeschool program paid as an Independent Contractor
  • Classical Conversations(R) Directors
  • CC tutors
  • Coaches, musicians, artists, etc. hired to teach at a homeschool co-op


The ebook is 60 pages long and contains information on

  • Business Start Up
  • LLC status
  • Tax Deductions
  • Tax Forms
  • Sample Tax Returns
  • Self Employment Tax
  • Paying Yourself
  • Paying Others
  • Businesses Using Churches
  • Should My Homeschool Program Be a Nonprofit?

I hope you find the ebook and the webinar helpful this tax season!

Homeschool theater program has income from advertising. Do they owe taxes?

Dear Mrs. Topp,

Our homeschool co-op has a yearly theater production that costs $35 per student to participate in the production. The theater teacher collects and uses all funds for the production. We now have local businesses that would like to advertise (by giving a donation) in the theater program. I understand that the business can use the donation as an advertisement write off, but what does the co-op or teacher do with the income, regarding the IRS?
Thank you for your time.

G.W.

Dear G.W.,

Good for your co-op for staging a theatrical production. I was in theater in high school and my daughter was in several homeschool theater productions too! It builds confidence!

The co-op teacher should turn over the funds to the co-op’s treasurer and he/she should deposit the money into a bank account that is established in the co-op’s name. A bank or credit union should open a nonprofit or a “club” account for the co-op.

They will want your EIN (Employer Identification Number) letter from the IRS. They may also want some official document like bylaws. My credit union wanted a letter signed by two officers stating that I, as the treasurer, had authorization to open an account for the nonprofit. Call your bank or credit union to see what they will require to open a nonprofit or club checking account.

You might find this podcast helpful: Tiny Homeschool Groups: Do We Need a Bank Account?

Income from advertising is NOT a donation from the donor. Do not give the donor a donation receipt. He received something or value (advertising) in exchange. He can deduct the cost of the ad in your theater program as advertising expense.

By the way, many nonprofits don’t accept ads, but rather “qualified sponsorships” and simply acknowledge their sponsors with a “thank you” in their programs. These are different from ads. Typically only the company name or logo is presented. No inducements to buy or product information is given in a sponsor thank you. Here’s a helpful explanation http://www.nonprofitlawblog.com/ubit-advertisements-vs-qualified-sponsorship-payments/

Advertising income is called unrelated business income for the nonprofit. Fundraisers and any income not related to your educational purpose is unrelated business income and and you must report it and pay tax on it.

Fortunately, the IRS has several ways to avoid paying the unrelated business income tax (UBIT):

  1.  The first $1,000 in income from an unrelated business will not be taxed.
  2.  If the fundraiser (or unrelated business) is run substantially by volunteers (i.e., no paid staff) then the proceeds are not taxed.
  3. If the fundraiser is not regularly carried on, such as a once-a-year event or bake sale, then the proceeds are not subject to UBIT.
  4.  If you are selling donated items, like in a garage sale, the income raised is not taxed.
  5. Qualified sponsorship payments are not unrelated business income.

Usually exception #1 or #2 will apply to small homeschool nonprofits, so your co-op should be able to receive income from advertising without worrying about paying tax on it.

It’s a good idea to create a line item in your record keeping labeled “Advertising Income” so it’s clearly differentiated from other income.

I hope that helps.

Carol Topp, CPA
HomeschoolCPA.com
Helping homeschool leaders

Taxes for Homeschool Business Owners ebook

I am pleased and proud to announce my latest book, Taxes for Homeschool Business Owners!
Read more here.


I wrote this book because I have spoken and emailed with so many homeschool business owners that are confused about their taxes. This is my attempt to keep you put of trouble with the IRS!

Thank you so much for the tax resources you put out there, it’s been super helpful for me as a director of our CC Homeschool campus! -Jessica


The ebook is 60 pages long and contains information on

  • Business Start Up
  • LLC status
  • Tax Deductions
  • Tax Forms
  • Sample Tax Returns
  • Self Employment Tax
  • Paying Yourself
  • Paying Others
  • Businesses Using Churches
  • Should My Homeschool Program Be a Nonprofit?

This ebook is a great resource for:

  • Tutors or teachers for a homeschool program paid as an Independent Contractor
  • Classical Conversations(R) Directors
  • CC tutors
  • Coaches, musicians, artists, etc. hired to teach at a homeschool co-op

As we do our taxes this year I am thankful for your knowledge and being willing to share it. I GUARANTEE many women WEREN’T doing their taxes correctly. -Julie


Please do not share the ebook file with other people or post the ebook file on the internet. If you know someone who would be helped by the book, please send them to this page and they can purchase their own copy.
Share this link: HomeschoolCPA.com/TAXESHSBIZ


I hope you find the ebook helpful this tax season!

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Where to get initial funding for a homeschool nonprofit start up?

A homeschool parent is launching a new homeschool program. Like many nonprofits, she needs some money to start up.

The main concern for our group at the moment are funds for filing (for nonprofit incorporation and 501c3 tax exempt status).

We have brained stormed and agreed on holding a spaghetti dinner fundraiser but we aren’t positive that this will bring the funds we are hoping for. Another idea is to present the exact cost to those members interested and see if they will be willing or able to divide the start up cost.

Sounds like you have an exciting adventure ahead of yourself by forming a  homeschool nonprofit!

You asked about initial funding. Many homeschool groups get their initial funding from donations (or loans) from the board members. You could also ask friends, family and potential members for donations.

Having a fundraiser or soliciting donations can be tricky because you need a bank account and to get that you need an EIN and you should get an EIN only AFTER you form a nonprofit corporation. But that’s what you need the funds for, so you’re caught in a Catch-22 cycle!

Additionally, some state require organizations to register before conducting a fund raiser or soliciting contributions from the general public. Here’s a source to see what your state requires: https://www.harborcompliance.com/information/nonprofit-compliance-guide

So it seems donations (or temporary loans) from the board members or potential members is your best option.

Helpful Resources

I have three podcast episodes  to explain starting a nonprofit or converting a homeschool business into a nonprofit organization. My podcast can be found at HomeschoolCPA.com/Podcast The episodes are:

  • Episode 168 Part 1 Nonprofit basics
  • Episode 169  Part 2 Nonprofit corporation
  • Episode 170  Part 3 Tax exempt application

Additionally, I have a webinar that goes into much more in-depth on starting a nonprofit organization. Unlike the podcasts which are free, the webinar costs $10.


Get details for Create a Nonprofit for Your Homeschool Community webinar at HomeschoolCPA.com/CreateNP

If you don’t want to be taxed on any surplus, then you’ll need nonprofit AND tax exempt 501c3 status for your new group. The webinar will explain that. 🙂

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Does bank account need to be less than $5,000 to be self declared tax exempt?

We are a small group (43 families) starting a non-profit. We have used several of your free and purchased resources. Thank you for your work in this space.

Question…does the opening balance of the bank account need to be less than $5,000 to remain self declared?

We will be receiving about $5,000 from a now defunct homeschool group to help us start off.

Our annual income won’t exceeded $5,000, so we plan to self-declare our 501c3 tax exempt status. Will the account balance of over $5,000 be considered income of over $5,000?

Thank you in advance for any information you may provide.

 

 

Thank you for contacting me.  I’m glad my resources have been helpful.

You asked, “..does the opening balance of the bank account need to be less than $5,000 to remain self declared?
No. The IRS only looks at the annual gross revenues, not bank balances.

If the original groups wants to gift the new organization $5,000, that would be income (a donation) in the year it is received.  So that large donation could mean the new group has over $5,000 in gross revenues in that year.

But the IRS guidance* for self declaring 501c3 tax exempt status says:
normally not more than $5,000.”

A one time large gift would not be “normal,” so the organization could still self-declare 501c3 tax exempt status if your normal gross revenues are under $5,000/year. 🙂

I hope that helps!

* Source: Instructions for Form 1023 page 1 “Form 1023 not necessary.”

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Top 10 Tips for Homeschool Leaders: Paying Workers

 

Lots of homeschool groups hire and pay teachers to conduct classes. Sometimes these teachers are homeschool parents, but sometimes they are professional instructors. Homeschool leaders have a lot of questions about paying teachers and other workers.

 

 

Topics in this episode include:

• Independent Contractor or employee
• The factors the IRS considers in classifying workers
• What if parents pay teachers directly?
• How paying teachers affects your church host
• Can Independent Contractors receive tuition discounts

This is the fourth part of a 5-part series on Top 10 Tips for Homeschool Leaders, a workshop given to homeschool leaders in Wichita, Kansas.

Each episode can be found at HomeschoolCPA.com/Podcast. In the 5-part podcast series Carol will cover:
Episode # 180 Board duties
Episode # 181 Bylaws
Episode # 182 Preventing fraud
Episode # 183 Paying Workers
Episode # 184 Insurance and Record keeping

 

Featured Resource:

Paying Workers in a Homeschool Organization
Are you paying workers in your homeschool organization?

• Can a volunteer be paid?
• Should a worker be treated as an employee or independent contractor?
• Do you know the difference?

Homeschool leader and CPA, Carol Topp, has the answers to your questions in her book Paying Workers in a Homeschool Organization.
This 130 page book covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

 

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What does it cost to get tax exempt status?

How much does it cost to be a 501c3? My homeschool group is new and we don’t have a lot of money.
-Homeschool leader

 

Dear homeschool leader,

It’s not as expensive to apply for 501c3 tax exempt status as it used to be, especially if your organization is small (revenues less than $50,000/year) and is eligible to file the shorter IRS Form 1023-EZ.

Here’s an explanation of the cost to get 501c3 status from my webinar on 501c3 Application for Homeschool Nonprofits

This webinar (90 minutes total length) will explain the benefits of tax exempt status, the application process and walk you through the application Form 1023-EZ line-by-line. At the end of the webinar you’ll be equipped to apply for tax exempt status by yourself. The cost of the webinar is $25.

 

Get more information on the webinar 501c3 Application for Homeschool Nonprofits

 

Carol Topp, CPA

HomeschoolCPA.com

Top 10 Tips for Homeschool Leaders: Preventing Fraud

 

Let’s hope fraud or embezzlement never happens in your homeschool group! Do you have safeguards to spot it and prevent it?

In the podcast Carol mentions her list of “Best Practices to Prevent Fraud.” Find it here.

 

This is the third part of a 5-part series on Top 10 Tips for Running a Homeschool Group, a workshop given to homeschool leaders in Wichita, Kansas. You will probably find many of the audience questions would be a question you might ask as well!

Each episode can be found at HomeschoolCPA.com/Podcast. In the 5 part podcast series Carol will cover:

Episode # 180 Board duties

Episode # 181 Bylaws

Episode # 182 Preventing fraud

Episode # 183 Paying Workers

Episode # 184 Insurance and Record keeping

 

You might find Carol’s podcast series for Tiny Homeschool groups helpful

Tiny Homeschool Groups: Are We a Nonprofit?

 

Featured Resource

Money Management in a Homeschool Organization

  • Does your homeschool group manage their money well?
  • Do you have a budget and know where the money is spent?
  • Do you know how to prevent fraud?

This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.

Click here for more information

 

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Can my individual homeschool have a fund raiser?

Can we (an individual homeschool) be allowed to do fund raising similar to youth sports groups, scouts,etc?

What a good question. In general I say, Yes, you can participate in a fund raiser if the fund raising organization allows it. BUT, the profit you make is taxable income and you’ll need to report it on your tax return.

Another homeschooling mom e-mailed me with a similar question:

With 6 children needing school curriculum, we are coming up short in finances. We contacted a calendar company that said it would be permissible for us to sell calendars as a fund raiser for our homeschool. We accepted personal checks made out to our homeschool name (that we registered with the state school board, considered a non-profit private school). We do not have a checking account with our homeschool name on it. Therefore, we have no way to deposit them.

What is your advice to us? The checks amounted to $90. Is this method acceptable to continue as long as we pay taxes on it? Mrs. W.

By selling calendars Mrs W. was operating a small for-profit business. She is free to use the profit of the small business for anything she wishes, including homeschool books and supplies. Since Mrs W. didn’t mention what state she was in, I cannot determine if her state requires business registration. Many states do not require any type of registration for a sole proprietorship using your own name. You may have to file a name registration with your Secretary of State to establish a business name.

To deposit these checks Mrs W. needs to open a checking account in the homeschool’s name. You’ll have to get an EIN number from the IRS at www.irs.gov. You can then spend the money in the checking account on homeschool supplies and close it or keep a small amount in it until next year.

Mrs W. should report the $90 as income on her tax return as either Other Income on line 21 of the 1040 or on Schedule C Business Income if she had expenses from the sale of the calendars (postage, mileage, etc…)

Quite a lot of work for a $90 fund raiser, huh?

Before you try a fund raiser for you individual family homeschool make sure its worth the effort of getting a business name, EIN, and checking account.

Is it worth the time and effort for the money you will raise?
Maybe try having a garage sale or sell something to bring in income instead!

My book Money Management in a Homeschool Organization covers fundraising and offers some ideas for easy fundraisers.

 

Carol Topp, CPA
HomeschoolCPA.com

Tiny Homeschool Groups: Do We Need a Bank Account?

Tiny Homeschool Groups: Do We Need a Bank Account?

Tiny homeschool groups have different challenges than large programs. They are limited on resources, volunteers, and activities. But they still have questions about legal status, money and taxes that the large homeschool organizations have.

In this 4-part podcast series, Carol Topp, CPA answers the common questions that tiny homeschool groups face. All podcasts are available at HomeschoolCPA.com/Podcast

  • Episode #175 Are We a Nonprofit?
  • Episode #176 Do We Need to File Anything?
  • Episode #177 Do We Need to Pay Taxes?
  • Episode #178 Do We Need a Bank Account?

In this episode Carol Topp will explain when a tiny homeschool group might need to open a checking account.

  • The pros and cons of operating in cash and without a checking account
  • Warning against using a personal checking account
  • Steps to take before opening a checking account

Join the Facebook group for homeschool leaders: I am a Homeschool Group Leader. 600+ homeschool leaders offer ideas, encouragement and respectful exchange of ideas. https://www.facebook.com/groups/72534255742/

 

Featured Product

Money Management in a Homeschool Organization

  • Does your homeschool group manage their money well?
  • Do you have a budget and know where the money is spent?
  • Do you know how to prevent fraud?

This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.

Click here for more information