Reminder: Free webinar The IRS and Your Homeschool Organization is this Thursday

Reminder:

My webinar is this Thursday, Oct 27, 2011 at 8 pm ET

The IRS and Your Homeschool Organization
IRSwebinar

Quite an important topic! In this webinar I will discuss
  • Homeschoolers and the IRS
  • What does 501(c)(3) mean?
  • Is it needed for my group?
  • The benefits of 501c3 tax exempt status
  • The disadvantages too!
  • Why your organization should consider becoming a nonprofit corporation

There will be plenty of time for questions (typed into the chat area) or by phone.

This webinar is free, so tell your friends and fellow homeschool leaders. Ask your board to listen in as well.
Topic: The IRS and Your Homeschool Organization
Date: Thursday , October 27, 2011
Time: 8:00 pm Eastern / 7:00 pm Central
or call in to: Phone Number: (724) 444-7444. Enter this Call ID: 73712 when asked

pdfIconThis handout of the Slides will be very helpful as you listen in to the webinar:

IRS and Your Homeschool Org cover

Paperback book:The IRS and Your Homeschool Organizations

A 120 page book explaining the pros and cons of tax exempt 501c3 status. Is it needed? Is it worth it? Also covered are non profit incorporation, the application process, and how to maintain tax exempt status. Written specifically for homeschool groups.

Table of Contents
Read Sample Chapter One

Price: $9.95

buy-now-1

Free webinar: The IRS and Your Homeschool Organization

I have offered a few webinars in the past to help homeschool leaders like you:
Paying Workers in a Homeschool Organization (click here to listen to the webinar)
and
Fund Raisers for Homeschool Groups (click here to listen to the webinar)

 

I think it’s time for another webinar and the topic will be:
The IRS and Your Homeschool Organization
IRSwebinar

Quite an important topic! In this webinar I will discuss
  • Homeschoolers and the IRS
  • What does 501(c)(3) mean?
  • Is it needed for my group?
  • The benefits of 501c3 tax exempt status
  • The disadvantages too!
  • Why your organization should consider becoming a nonprofit corporation

There will be plenty of time for questions (typed into the chat area) or by phone.

This webinar is free, so tell your friends and fellow homeschool leaders. Ask your board to listen in as well.

 

Topic:  The IRS and Your Homeschool Organization
Date: Thursday , October 27, 2011
Time: 8:00 pm Eastern / 7:00 pm Central
or call in to: Phone Number: (724) 444-7444.   Enter this Call ID: 73712 when asked

 

pdfIconThis handout of the Slides will be very helpful as you listen in to the webinar:
 

Paperback book:The IRS and Your Homeschool Organizations

CoverA 120 page book explaining the pros and cons of tax exempt 501c3 status. Is it needed? Is it worth it? Also covered are non profit incorporation, the application process, and how to maintain tax exempt status. Written specifically for homeschool groups.

Table of Contents
Read Sample Chapter One

Price: $9.95

buy-now-1

Homeschool Support Group asks: Am I doing everything legally?

WomenHavingLunch

We live in California and started a homeschool group about 5 years ago. We average about 80 families a year. We are strictly social/support, not a co-op. We have different clubs that meet once a month.  These are taught by moms who want to and all parents stay and participate. We also have parties and take field trips together.

We do collect $20 a year per family to off-set the cost of parties and clubs so that no one person has a financial burden. We have kept things simple all of this time and operate on a cash only basis. We carry over a balance to make sure that our kick-off parties are paid for. We collect approx. $1600.

My question is- Am I doing everything legally? It is my intention to make sure I am being legal. I would like to continue to keep things this simple 🙂

I have had some doubt due to the homeschool co-op in town that has a 501 (tax exempt status) and charges members higher prices due to church rental and insurance. However, I have been questioned why we don’t have to do that?

Any insight would be helpful.

Thank you!
Vanessa

I think you’re understanding things correctly and doing many things just fine for a group of your size. 🙂

Technically, your support group would be considered an unincorporated association and the IRS would probably classify it as a 501c7 Social Club. I discuss Social Clubs on these two blog posts:
Are Homeschool Support Groups Automatically Tax Exempt?
Compare 501(c)(3) Charity to 501(c)(7) Social Club

Homeschool co-ops are different from support groups. Co-ops do not usually fit the definition of 501c7 Social Clubs; They exist for more than just social reasons; they have an educational  purpose. In additional co-ops collect more money than support groups and so they look into 501c3 status as a tax exempt educational organization.

So, Vanessa, you can tell people who ask that support groups and co-ops are different. The link above compares the two.

Carol Topp, CPA

Congratulations to MEC on 501c3 tax exempt status!

IRS

The Myerstown Enrichment Center in PA was just granted 501(c)(3) tax exempt status with the IRS!

The homeschool co-op decided to apply for tax exempt status with  the IRS on their own. But unfortunately they ran into some snags.

They had checked a box to apply as a school, but the IRS suggested they did not fit the description of a school.

One of their leaders wrote to me:

I have gotten several letters from the IRS requesting more information or explanations of something.  Each time, my time to respond gets shorter and shorter. I am feeling very unqualified to continue.

I helped them sort things out with the IRS, wrote a letter, talked to the IRS examiner and faxed her information when asked.

We are so pleased to announce that they are now a 501(c)(3) tax exempt organization!

The leader told me:

Something for you to consider:  mention in your seminar that co-ops are applying for 509(a)(2)* under 501 (c)(3) and then maybe those of us who are confident enough to fill out our own forms might get it right the first time.
Or, you could create a self-help packet to sell to said individuals.

* an organization that receives its income from membership fees or activities related to its purpose and not a school

The other week, the president and I were discussing this whole process and we regret that we just didn’t have you do it for us from the beginning.

Again, thank you for your help!
God bless you!

I am working on putting the final touches on that “self-help” packet mentioned; it’s an ebook titled “The IRS and Your Homeschool Organization. I hope to release it in September.

Carol Topp, CPA

New article on homeschool support groups and the IRS

Mounting bills Project 365(2) Day 142
Creative Commons License photo credit: Keith Williamson

I just uploaded a new article onto my Leader Tools/Articles page

Are support groups automatically tax exempt?

It discusses the difference between homeschool co-ops and support groups in the eyes of the IRS and the benefits of being a support group!

Here’s what one homeschool leader said when I shared this article:

The path I believe we will go down is to become a  Non Profit Corporation and then (be a) 501(c)7.  You provide a great and much needed service to homeschooler support groups and co-ops.  I wish our previous board knew about you and your web site.  I certainly will be spreading the word.

Thanks again.  I hope I get to meet you in person some day.

Jeff

If you haven’t read the articles on my Leader Tools page in a while, why not print some out and share them with your board?

Helping you lead your homeschool group,

Carol Topp, CPA

Can we accept donations from Paypal and Google checkout

paypal
Creative Commons License photo credit: iliveisl

From my understanding, you can’t use Google checkout for donations unless we are a 501(c)(3)
https://checkout.google.com/support/sell/bin/answer.py?hl=en&answer=72721
https://www.google.com/support/forum/p/checkout-merchants/thread?tid=00a314399fff1200&hl=en

I do think you can use PayPal for donations, even if we aren’t a 501(c)(3). It’s taxable but considered a gift. Do I understand this correctly?

You are correct  that only donations to a 501(c)(3) organizations are tax exempt.

I read the links you provided and Google only allows 501(c)(3) and 501(c)(6) (Business leagues with a 501c3 charitable fund) organizations to accept donations.

Paypal is much  less restrictive (but the IRS determines which donations are tax deductible, not Paypal!)

If your organization’s website accepts donations and is not a 501c3, then the income is fully taxable.

FWIW, here’s a chart explaining the various 501c types and when tax deductible donations are allowed by the IRS: https://www.guidestar.org/help/501c_orgs.jsp

How can your homeschool group become a 501(c)(3) tax exempt organization? Start by reading these articles:

501c3 tax exempt status

Carol Topp, CPA
HomeschoolCPA.com

Congratulations on 501(c)(3) tax exempt status!

Congratulations to two homeschool organizations that received letters from the IRS this week granting them 501(c)(3) tax exempt status!

JMJ Tampa Bay in Florida

and

Community Homeschool Outreach in OK.

I was so happy to help these organizations achieve this important status.

Would your homeschool group benefit from tax exempt staus? Do you qualify?

Learn more by reading my articles under Leader Tools.

Carol Topp, CPA

Are Homeschool Support Groups Automatically Tax Exempt?

women_group_Feet

I help homeschool groups file for tax exempt status with the IRS.

Most of them are homeschool co-ops and want 501(c)(3) status as a “qualified charity” because they have an educational purpose and desire tax deductible donations, tax -free profits and sometimes other perks that come with 501(c)(3) status.

But there is another type of tax exempt status that may apply to homeschool support groups: 501(3)(7) Social Club.

Here’s what it takes to be classified as a 501(c)(7) Social Club:

1. Purpose is for pleasure, social or recreation. A nonprofit motive and no part of the net earnings may inure to the benefit of any person having a personal and private interest in the activities of the organization

There must be an established membership of individuals, personal contacts and fellowship. A commingling of the members must play a  major role in the life of the organization.

Common examples include  college fraternities or sororities, country clubs, garden clubs, hobby clubs, etc.

2. Limited membership: membership is limited and consistent with the character of the club

3. Supported by membership fees. In general, your club should be supported solely by membership fees, dues, and assessments. A section 501(c)(7) organization can receive up to 35% of its gross receipts from sources outside of its membership without losing its tax-exempt status. For example, up to 35% of your total revenues can come from fund raising.

4. Business activities. If your club will engage in business, such as selling products or services, it generally will be denied exemption. However, your organization can provide meals, refreshments, or services related to its exempt purposes only to its own members or their dependents or guests.

5. Tax treatment of donations. Donations to social clubs are not deductible as charitable contributions on the donor’s federal income tax return.

Sources:
https://www.irs.gov/pub/irs-tege/rr58-589.pdf
https://www.irs.gov/publications/p557/ch04.html#en_US_2010_publink1000200325
https://www.irs.gov/irm/part7/irm_07-025-007.html

These criteria fit a homeschool support group. The members are limited to homeschool parents (or those interested in homeschooling), meet for social reasons, are supported by membership fees (and maybe a little bit of fund raisers), do not sell products or services and do not collect tax deductible donations.

So most homeschool support groups can be considered 501(c)(7) Social Clubs.

Most homeschool co-ops do not fit this description because they sell services (classes) and have an educational purpose, not a social or recreational purpose. They may qualify for 501(c)(3) tax exempt status as an educational organization.

Confused about whether your organization is a 501(c)(3) “qualified charity” or 501(c)(7) Social Club?

This chart may help: Compare 501c3 to_501c7

Here’s the good news: If your organization fits the bill to be a 501(c)(7) Social Club, you do not have to file the IRS application (Form 1023 or 1024) like 501(c)(3) organizations must. 501(c)(7)s  are allowed to “self-proclaim” their tax exempt status.

Here’s the bad news: The IRS requires all tax exempt organizations for file an annual information return , Form 990/990EZ or 990N.  Failure to file the Form 990/990EZ/990N for 3 consecutive years means your tax exempt status is automatically revoked. Need help getting your tax exempt status reinstated? I can help.

Carol Topp, CPA

Video: Homeschool and Taxes

The Homeschool Channel TV has a short video explaining tax breaks for homeschoolers.

You may need to register as a member of Homeschool Channel. It’s free and an excellent resource of videos for your family.

View Homeschool Channel TV: Homeschool and Taxes here

HomeschoolChannel_Taxes

Jeremy and Steve discuss 501c3 charitable status.

I have an article on my blog that answers the question:

Can my family homeschool be a nonprofit charity?

Carol Topp, CPA

Can’t we operate without IRS tax exempt status?

irs_sign

Carol,

Does my homeschool support group really need to apply to 501(c)(3) tax exempt status with the IRS? It seems like a lot of time and money. We have a small budget and we don’t accept tax deductible donations.

Can’t we just operate as we are?

You described your group as a support group, meaning you exists for the benefit of the members and you do not accept or plan to seek tax deductible donations.

Many larger homeschool organizations, especially co-ops that have an educational function and not just a support group purpose, seek 501(c)(3) tax exempt status for its many benefits:

  • tax exemption
  • ability to accept tax deductible donations
  • ability to participate in fund raisers only open to 501(c)(3) charities

See my article Do we need 501c3 status?

But homeschool support groups are different. They don’t hold classes; they focus on fellowship. Support groups don’t accept donations; they get all their income from membership dues and maybe a little bit of fund raising.

I attended an IRS webinar and asked your question. Here’s what the IRS said:

It is true the Tax Reform Act of 1969 requirement to “give notice,” (to apply for recognition of tax-exempt status) applies only to organizations wanting section 501(c)(3) status.
So, although other types of organizations are not required to file Form 1024, they may still wish to do so in order to receive a determination letter of IRS recognition of their status. Having the determination letter ensures public recognition of their status and may enable exemption from some state taxes.
Also, even though an organization may “self-proclaim” its tax-exempt status, it is still subject to the rules governing its particular sub-section. It is also subject to IRS examination to determine whether it meets the requirements for the exemption it is claiming.

Translation:

If your organization wished to obtain 501(c)(3) tax exempt status, then you must file an application for that. I can help . See my Services page

If  instead, your group fits the criteria of a social club (what the IRS calls a 501(c)(7)), then your organization can “self-proclaim” that you are tax exempt without filing the paperwork.

But you still have to obey the rules and fit the IRS definition of a social club. 

What it takes to be classified as a 501(c)(7) Social Club

And you don’t have a nice letter from the IRS to prove that you are tax exempt.

So there you have it…most homeschool support groups, if they operate as a social club, can be considered tax exempt without going through the time and expense of tax exempt application with the IRS.

P.S. But even if your group does not have to file the application paperwork (Form 1023 or 1024), your organization must still file an annual information return called a Form 990/ 990EZ or the simple on-line Form 990N with the IRS. Read more here: IRS Form 990N FAQ

Carol Topp, CPA