A homeschool group in Georgia asked for my help because they had been getting letters from the IRS about back taxes.
We are in dire need of your help. Our homeschool group has received notices from the IRS saying that we need to contact them regarding our overdue taxes. Our group was incorporated (in 2003) but we have not filed any paper work (tax returns or corporate updates) since. Please advise, as soon as possible.
I e-mailed and spoke to this homeschool leader several times, so I’ll summarize the resolution:
The treasurer e-mailed me because she had been getting letters from the IRS stating that the homeschool group was late in filing their corporate income tax return. The group ignored these letters for a few years until they found my website. It seems that the original founder had mistakenly thought that the group owed corporate income tax on their surplus. She had filed a Form 1120 (Corporate Income Tax Return ) with the IRS and paid them $71 several years ago. The IRS expected to see corporate tax returns every year thereafter and was mailing the letters when the returns were not filed.
Fortunately, the group had filed for nonprofit incorporation status with the State of Georgia several years before. This was solid documentation that the group was a nonprofit organization (even they did not have 501 tax exempt status with the IRS).
I called the IRS on behalf of the group and the IRS employee told me to mail a cover letter and a copy of the nonprofit incorporation certificate from the State of Georgia. I did so and when I called the IRS two weeks later, the IRS employee told me that the situation was taken care of, the case was closed and the group wouldn’t be getting any more letters! (We didn’t ask for a refund of the $71 previously paid, though!)
That is an excellent example of how nonprofit incorporation status helped one group avoid paying federal corporate income tax. I’m not sure that I could have convinced the IRS of their nonprofit status without the nonprofit incorporation certificate from the State of Georgia.
This is NOT to say that state nonprofit incorporation is the same as tax exempt status with the IRS. Tax exempt status with the IRS (granted by applying to the IRS using Form 1023 and paying the IRS fee) is the only way to guarantee that your group’s financial surplus will truly be classified as tax exempt.
You can read more about the benefits of nonprofit incorporation and tax exempt status in my book The IRS and Your Homeschool Organization.
Carol Topp, CPA