Does your homeschool group have fundraisers? You may need to register in your state

Carol,

We’re a 501(c)(3) tax exempt organization (Thanks for helping us with that!). In your letter to us you say that if we “solicit contributions” we may need to register in our state. We don’t ask for donations, but we do have several fundraisers each year. Are our fundraisers considered “solicited contributions”?

Jennifer in Georgia

Jennifer,

Congratulations on your 501(c)(3) tax exempt status from the IRS. Now it’s time to determine what your state requires from your organization.

Charitable solicitation registration

My source for information on nonprofit fundraisers is Nolo’s Nonprofit Fundraising Registration: The 50 State Guide

The Guide explains that 39 states (and the District of Columbia) require registration from nonprofit organizations that solicit donations in their state. (This is all nonprofits, not just those with 501(c)(3) tax exempt status.)

Definition of charitable solicitation

“Solicit contributions is defined broadly…Charitable solicitations don’t always have to involve asking for a donation. Offering to sell a product or service that includes a representation that all or part of the money received will be devoted to a charitable organization or charitable purpose is considered a charitable solicitation and triggers the registration requirement.”

So, fundraisers are included in the definition of charitable solicitations. That means if your homeschool group holds a fundraiser, you probably need to register in  your state. But keep reading…

Exemptions

The good news is that all states offer exemptions to their charitable registration for certain types of nonprofits. One common exemption is for small nonprofits:

“Most states exempt very small nonprofits from registering. In most states “small” is defined by a nonprofit’s gross revenues, not the number of members it has. In many states (about 16) a nonprofit qualifies for this exemption if it has annual gross revenues of less than $25,000.”

Nolo’s webpage with more exceptions to charitable registration

I researched the exemption rules in Georgia (it was included in the Form 1023-EZ Application for 501(c)(3) tax exempt status service that I provided to Jennifer’s organization ). I learned that Georgia offers an exemption from charitable registration  for nonprofits whose total revenue from contributions has been less than $25,000.00 for both the immediately preceding and current calendar years. Jennifer’s organization is under that $25,000 threshold in contributions and fundraisers, so she was happy to hear that her homeschool group did not need to register in Georgia. 🙂

Help for your homeschool organization

Determining whether your nonprofit is exempt from charity registration can be difficult. Exemptions vary from state to state. To determine whether your nonprofit is exempt in your state, you could look up the charitable solicitation laws of that state. The law is usually found on the Attorney General or Secretary of State’s website.

Or contact me, Carol Topp. I can do the research for you since I know what I am looking for!. This service includes drafting a letter for your board and future boards explaining the all required forms in your state with due dates. Cost: $50.

 

Carol Topp, CPA

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How does the IRS see my homeschool support group?

Your homeschool support group is probably a social club in the eyes of the IRS. Listen to this short podcast as Carol Topp, the HomeschoolCPA explains that social clubs can get automatic tax exempt status without applying, but they must maintain that tax-free status.

Listen to the podcast (14 minutes)

Here’s a link to the blog post Carol mentioned in the podcast: How to get into the IRS exempt database:

How to get added to the IRS database and file the Form 990N

FEATURED PRODUCT from HomeschoolCPA:

The IRS and Your Homeschool Organization

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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Self-declared tax exempt status for 501c3 homeschool groups

We are just starting up our group and we do not want to do anything illegal, but we would not qualify as a nonprofit right now, so as per your IRS book, we would be labeled an Unincorporated Association. My question is… Do we need to do anything legally to continue as a group. We do plan to open a checking account and have an EIN number.
I just felt that for a group that is just starting and is not a nonprofit or at the 501 (c) (3) status yet, we don’t know the first steps to get a group of and running and if we need to do anything legally to start. Thank you so much for your time!
-EC

 

Dear EC,

Please watch this video 3 times (yes, 3 times!):

 

You will hear that to legally and correctly set up a nonprofit you need 3 things:

  1. A mission that is not motivated by profit
  2. A board
  3. Organizing documents. Usually bylaws but Articles of Association are also recommended. Get samples here

If you have those three things, your organization is a nonprofit. Congratulations! It may not be a nonprofit corporation; instead it is an unincorporated association, as you mentioned, but it is still a nonprofit.

But, there is a difference between nonprofit status and tax exempt status

Nonprofit status is granted by your state while tax exempt status is granted by the IRS to qualifying nonprofit organizations. Typically nonprofits need to formally apply for tax exempt status with the IRS.

But small nonprofits can self declare  501(c)(3) tax exempt status if your annual gross revenues* are $5,000 or less.

*Annual gross revenues are all the money you take in in a year, even if it just goes right back out. It’s not what is left over at the end of the year. It is not the amount in your checkbook. It is annual (yearly) gross (all) revenues (intake).

This video may be helpful: https://www.youtube.com/watch?v=DCFjnnY7mEw

 

How to self declare 501c3 tax exempt status

Since you have not officially applied on paper for 501(c)(3) status  (you self-declared 501(c)(3) status and don’t have to file the paperwork), your nonprofit organization is not in the IRS database (yet), so you need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their database so you can begin filing the Form 990-Ns.

It typically takes 6 weeks after you call to be added to the IRS database.

Say something like this,

“We’re a brand new 501(c)(3) educational organization and I needed to get added to the IRS exempt organization database so we can start filing our 990-Ns.”


**Note that only 501(c)(3) organizations with less than $5,000 annual gross revenues can “self-declare” their tax exempt status. Organizations with more than $5,000/year in revenues must apply for 501(c)(3) status using Form 1023 or the new, shorter Form 1023-EZ.


The IRS employee will ask for your EIN and organization’s name, address, and probably a contact name.

They may also ask what date your fiscal year ends. Many homeschool groups operate on a calendar year, but some operate on a school year with a year end of June 30 or July 31. Look at the form you filed when you applied for your EIN to see what you chose as your fiscal year end.

They may ask if you have “organizing documents.” They mean bylaws or Articles of Association. So create bylaws or Articles of Association/Articles of Incorporation before you call the IRS. Get the board to approve and sign them. Sample bylaws and Articles of Association can be found here.

Call the IRS early in the morning. They open at 8 am ET and you can usually get through pretty quickly of you call then. Record the date you call, the IRS employee name and their identification number.

 

How to keep your 501(c)(3) tax exempt status

Be sure you go online (IRS.gov/990n) to file the Form 990-N anytime after your fiscal year ends and before its due date which is 4 1/2 months after the end of your fiscal year. If you operate on a calendar year, the 990-N is due May 15.

 

Carol Topp, CPA

Helping homeschool leaders with legal and tax compliance

 

Should my homeschool group be a nonprofit or a for-profit business?

A woman asks if her Classical Conversations homeschool program should be a for-profit business or a nonprofit organization.

Carol Topp, CPA explains the four differences between for-profit and nonprofits.

The differences include:

1. Your motive. Is it to make a profit or your mission?

2. Control: do you want to retain control or are you willing to allow a board to control and direct the group?

3. Taxes. Nonprofits can apply for and receive tax exempt status.

4. 501c3 tax exempt organizations can accept tax deductible donations.

Listen to the podcast (11 minutes)

 

Phone Consultation with Carol Topp, CPA

Phone Consultation: A pre-arranged phone call to discuss your questions. My most popular service for homeschool leaders. It’s like having your own homeschool expert CPA on the phone!

Cost: $85/hour to nonprofit organizations.  $100/hour to for-profit businesses. $60 minimum.

Q &A by Email:  I am willing to answer questions by email, but it is very time consuming to read and reply to emails. I charge a reduced rate of $50/hour to read and reply to emails. Minimum $25.

Contact HomeschoolCPA, Carol Topp, CPA, to arrange a telephone consultation.

Click Here to request more information!

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Keep Up To Date on State Filings for Your Homeschool Nonprofit

Most homeschool leaders know that they need to report annually to the IRS, but did you know that there are probably filings to do in your state every year? Carol Topp, the HomeschoolCPA, discusses the most common state reports that homeschool nonprofit organizations need to file.

Listen to the podcast

Featured Resource

Webinar on IRS and State Flings for Homeschool Nonprofits

Getting 501c3 tax exempt status is a great accomplishment! If you’ve done that, congratulations!

But don’t think you are done with government forms just yet! Your state and the IRS have several reports that must be filed regularly to maintain your precious tax exempt stats.

Carol Topp, CPA the HomeschoolCPA has helped over 100 homeschool organizations apply for tax exempt status. She has prepared a webinar on IRS and State Filings for Homeschool Nonprofits. Carol explains the IRS annual reports for tax exempt nonprofits and how you can know what your state requires.

In this webinar, you will learn:

  • The importance of maintaining 501c3 tax exempt status
  • The IRS Form 990 series. What form your group needs to file.
  • How to know if you’ve missed filing IRS returns
  • How to see Form 990-EZs and 990s from other nonprofits.
  • An explanation of the IRS Form 990-N.
  • What filings may be required by your state with examples

Click Here to get more information!

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Are 501(c)(3) and 501(c)(7) the only options for a homeschool group?

We are meeting with support group leaders this weekend and a question has come up about legal status of homeschool groups.

Are 501(c)(3) and 501(c)(7) the only options for a homeschool group?

Dorothy

 

Dorothy,

The IRS has over  20 types of tax exempt status, all 501 (c)-somethings. Everything from Teachers’ Retirement Fund Associations (c)(11), Veterans organizations(c)(19), and Cemetery Companies (c)(13).

501(c)(3) Qualified Charity which includes educational organizations and 501(c)(7) Social Clubs (i.e. support groups) are most common for homeschool groups.

501(c)(4) Social Benefit status fits state-wide homeschool organizations, some homeschool conventions, and politically active homeschool organizations.

In the last 10 years, I’ve seen more and more homeschool organizations operate as for-profit business without nonprofit tax exempt status.

So while there are several options for homeschool groups, the vast majority of homeschool organizations are 501(c)(3)  educational organizations.

Carol Topp, CPA

 

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What Homeschool Leaders Don’t Know About 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 understand tax exempt status. It’s easier than ever to get tax-exempt status. Should your group apply?

Listen to the podcast

 

Tax Exempt Status for Small Nonprofit Organizations

Contact HomeschoolCPA, Carol Topp, CPA, to arrange for assistance in applying for 501(c)(3) tax exempt status.  This service involves several telephone calls and e-mails.

Carol offers a variety of services:

  •  IRS Streamlined Form 1023-EZ Application
  • Full 501(c)(3) Application
  • Full 501(c)(4) or 501(c)(7) Application
  • State filings
  • Review of Self Prepared Application

Click Here to request more information!

Carol Topp, CPA

HomeschoolCPA.com

Helping homeschool leaders with tax and legal issues

 

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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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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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Are discounts to homeschool board members taxable compensation?

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My homeschool group gives a fee waiver of our dues to our board officers. Would that discount be reported to our officers as taxable compensation?

Melissa

 

Melissa,

This is an excellent question because I’ve encouraged homeschool groups to offer discounts on membership fees to their volunteers or board members as a way to show appreciation.

The IRS defines compensation as:

compensation includes salary or wages, deferred compensation, retirement benefits…, fringe benefits (personal vehicle, meals, lodging, personal and family educational benefits, low interest loans, payment of personal travel, entertainment, or other expenses, athletic or country club membership, and personal use of your property), and bonuses.[i]  (emphasis added)

[i] Instructions for Form 1023 https://www.irs.gov/instructions/i1023/ch02.html#d0e1909

 So, free or reduced fees that are educational benefits is taxable compensation to your board members.

So here’s my advice:

  • Keep your fee waivers to board members small and insignificant. The IRS does state that insignificant benefits to volunteers is not taxable income.
    • I can help you determine if your fee waivers or discounts are “insignificant.” Just contact me.
  • Consider showing appreciation with noncash gifts such as food, chocolate, or flowers. Buy resources to make their jobs easier including helpful books, hiring a payroll company (your treasurer will love it!), accounting software, etc.
  • Have the amount of fee waivers decided by a separate, independent committee or put it to the vote of the full membership. The board should not vote themselves a fee waiver. It’s a conflict of interest.
  • Add a provision to your bylaws allowing a small fee waiver (or tuition discount) to board members or other volunteers. Consider granting a percentage discount instead of a dollar amount such as 20% off the fee.

 


Have more questions about compensation to board members in your homeschool organization?

payingworkerscoveroutlined

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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Carol Topp, CPA

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