Hi Carol,
Our (homeschool group’s) yearbook is looking to take in the money through my personal PayPal account, then deposit it into a separate bank account so that our group does cross over the $5,000.00 mark. How is this done so that I don’t have to claim the money as extra income?
Currently, the group set up the PayPal account as a non-profit and now Paypal wants proof of this and we don’t have it. I suggested that they explain to Paypal that we are a Unincorporated Non-Profit Association.
Sandy in TX
Sandy,
The ideal way to operate is to set up a PayPal account for the Association/Homeschool Group and not run anything through your personal PayPal account. I understand from other homeschool leaders, that PayPal expects to see proof from the IRS of tax exempt status. They may also accept a nonprofit incorporation certificate from your state. They told one homeschool group they would accept “certified Articles of Incorporation.”
If you continue to use your personal PayPal account for the homeschool group’s revenues, then you may receive a Form 1099-K from PayPal stating how much money you were paid. A copy goes to the IRS and the IRS expects you to report this income on your tax return!
So stop using your personal PayPal account.
If your nonprofit is receiving more than $5,000 in gross revenues in a year, it’s time to file the Form 1023-EZ and apply for tax exempt status.
This webinar will help you do that.
https://homeschoolcpa.com/bookstore/webinars/501c3-application/
Carol Topp, CPA