Homeschool leaders frequently wonder, “Is my group supposed to be paying taxes to the IRS?” They ask if there is anything they should be reporting to the IRS, if so what and when.
You will owe the IRS tax on your surplus if your group has not obtained 501 tax exempt status, by either self-declaring tax exempt status of applying for tax exempt status.
How homeschool groups can self-declare tax exempt status:
1. Your homeschool co-op brings in income of less than $5,000 in a year.
If your organization’s gross revenues are under $5,000 a year, you are granted an exception from filing the application paperwork for 501(c)(3) status. You can “self-declare” your tax exempt status without applying. But you will still have annual reporting requirements, the Form 990N (see below).
If your co-op’s gross revenues are more than $5,000 a year, your organization should file an application (Form 1023 or the new, shorter Form 1023-EZ) with the IRS for 501(c)(3) tax exempt status. Approval of tax exempt status by the IRS means that your co-op will not pay income tax on its financial surplus. Your organization is also eligible to receive tax deductible donations and may participate in fundraisers only open to 501(c)(3) organizations, such as Box Tops for Education.
2. Your homeschool support group wishes to avoid taxes on their surplus.
If your homeschool organization is a support group, then you may be eligible for tax exempt status as a 501(c)(7) social club with the IRS. Social clubs can “self-declare” tax exempt status but some file an application (Form 1024) with the IRS. Read more about eligibility for 501(c)(7) social club status at HomeschoolCPA.com/SocialClub. Even if you self-declare tax exempt status for your support group, the IRS still requires an annual report (see below).
IRS Filing Requirement for All Nonprofit Organizations
As of 2006, the IRS requires all tax exempt nonprofit organizations (except churches) to begin filing an annual information return called a Form 990/990EZ or 990N, even if they have not yet applied for tax exempt status or are eligible to self-declare tax exempt status. The short, online Form 990N is for nonprofit organizations with annual gross revenues under $50,000. It is a very simple online form with only six questions. No financial information is given.
A. Calendar year or tax year dates
B. Check if gross revenue is $50,000 or less
C. Name and address of the organization
D. Employer Identification Number (EIN)
F. One officer’s name and address
The Form 990N is filed online at IRS.gov/990N and is due due 4 1/2 months after the end of your fiscal year (May 15 for groups that run on a calendar year).
Your organization may have difficulty in filing the Form 990N if you have not applied for tax exempt status. You will have to call the IRS Customer Account Services and ask to be added to their exempt organizations database so you can begin filing the Form 990Ns. Here are some tips of what to say when you call the IRS How to get added to the IRS database and file the Form 990N
What Happens if Your Organization Doesn’t File the Form 990N?
There is no financial penalty for late filing, but failure to file the Form 990N for three consecutive years means automatic revocation of tax exempt status. Lately, I have helped several homeschool organizations that did not file their 990Ns for several years (most did not know about the requirement) and had their tax exempt status automatically revoked.
If all this seems confusing or overwhelming, please visit my 990N FAQ page
Additionally, my book The IRS and Your Homeschool Organization can give you details on applying for tax exempt status.
And my webinar on IRS and State Flings for Homeschool Nonprofits will be very helpful.
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