Search Results for: 990N

New website for filing IRS Annual ePostcard Form 990-N

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The Internal Revenue Service (IRS) is changing the website to file the Form 990-N. The Form 990-N used to be hosted by the Urban Institute, but starting February 29, 2016, the IRS will host the Form 990-N submission website.

The new website is www.IRS.gov/990N

The Form 990-N is a short,  annual filing that small (those normally with annual gross receipts up to $50,000) tax-exempt organizations file in place of the lengthier Form 990-EZ or Form 990. In order to file the Form 990-N, all nonprofits will be required to complete a one-time registration and file Form 990-N submissions through the IRS’s website at www.IRS.gov/990N.

Who must file
Most small tax-exempt organizations whose annual gross receipts are normally $50,000 or less can satisfy their annual reporting requirement by electronically submitting Form 990-N if they choose not to file Form 990 or Form 990-EZ instead.

Exceptions to this requirement include:

Form 990-N is easy to complete. You’ll need only eight items of basic information about your organization.

Converting from a homeschool support group to a full service nonprofit organizaton

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Lots of homeschool support groups find themselves evolving into bigger organizations than their founders imagined. They grew from being small monthly support groups to larger organizations offering field trips, co-op classes, graduation ceremonies, clubs, and other activities.

For example, TACHE (Tyler Area Home Educators) in Tyler, Texas began in the 1980s as a small support group for homeschool families. They grew to over 400 families and now manage an annual budget of nearly $20,000 and offer a plethora of educational activities.

They wisely decided to incorporate as a nonprofit corporation in 2009. But, unfortunately, TACHE did not apply for 501(c)(3) tax exempt status at that time.

In September 2013 TACHE  decided it was time to apply for tax exempt status as a 501(c)(3) educational organization and contacted me. Because TACHE waited more than 27 months after their date of formation (in 2009) to apply for 501(c)(3) status, we had to explain TACHE’s history to IRS and give an explanation why they did not apply earlier.

I helped TACHE apply for 501(c)(3) status in February 2014 and after about 7 months of waiting, the IRS granted 501(c)(3) status.

But TACHE wasn’t finished with the IRS just yet. TACHE failed to file their Form 990-N Annual Information Return with the IRS for three consecutive years and had their tax exempt status automatically revoked. We were concerned that there would be a period of time when TACHE would have to file and pay income tax. There were a few phone calls and letters to the IRS, but finally the IRS reinstated TACHE’s tax exempt status and agreed that they did not owe any back taxes.

The process is does not always take that long, but here are a few lessons learned.

  • Don’t delay! Apply for 501(c)(3) tax exempt status within 27 months (or sooner) from your date of formation (usually the date of incorporation in your state as a nonprofit corporation)
  • File the Form 990-N every year. This is required for support groups as well as homeschool co-ops. If you fail to file the Form 990-N, the IRS will automatically revoke your tax exempt status.
  • Get help when you need it. My fees are reasonable and I focus on helping homeschool organizations.  Contact me.
  • Be patient. Although the IRS has cleared a lot of their backlog, it still took 11 months for the IRS to reinstate TACHE’s tax exempt status.
  • Learn all you can about tax exempt status for your homeschool group. My book, The IRS and Your Homeschool Organization, is a good start.

Congratulations to TACHE! It was along process, but it’s finished and TACHE can continue to serve homeschool families in Texas for many years to come.

Carol Topp, CPA


I will be recuperating from surgery and will be unavailable to answer your emails from November 15, 2015 until January 2016. Until then, here’s how you can get help.


How to know your status with the IRS

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We are trying to figure out what our status with the IRS is. We are a support group/co-op and just recently learned that we should be filing the 990N. We registered our name with the state in 2008. We got out EIN in 2009. We became incorporated in September 2014. Our annual gross revenue is less than $5,000.

 We have searched the IRS database of groups that have had their tax exempt status revoked and we are not listed. How do we find out what our status is and when the IRS is considering our date of formation so we know how to proceed?
Thanks for your help!
Anna in Ohio
Dear Anna,

You referred to an IRS database of exempt organizations called Select Check. I use it frequently to check on the status of nonprofit organizations.

But many times a homeschool nonprofit organization cannot find their name in the IRS database, usually because they have not applied for tax exempt status. That’s the situation for your group.

Your legal status is that you are a nonprofit corporation who can self declare your 501(c)(3) tax exempt status. Since your revenues are less than $5,000,  you can self declare your 501(c)(3) tax exempt status and do not have to officially apply for tax exemption.

The IRS considers your date of incorporation as your “date of formation.” You should get a new EIN for the new corporation and not use the old EIN from 2009. The IRS considers a corporation a new legal entity and you should get a new EIN to match it. Getting and EIN from the IRS

Even though you didn’t have to officially apply for 501(c)(3) status, the IRS does require you to file an annual information return, the Form  990-N. To be able to file the Form 990-N, you need to call the IRS Customer Account Services at 1-877-829-5500 and ask to be added to their exempt organization database so you can begin filing the Form 990Ns. It typically takes 6 weeks after you call to be added to the IRS database.

Say something like this,

“We’re a new 501(c)(3) educational organization and my CPA said I needed to get added to the IRS exempt organization database so we could start filing our Form 990-N.”

They will ask for :

  • your EIN(Employer Identification Number)
  • organization’s name
  • address
  • a contact name
  • Date your fiscal year ends. Many support 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 (SS-4) to see what you chose as your fiscal year end.
  • They may ask if you have “organizing documents.” They mean bylaws, Articles of Association, or Articles of Incorporation.

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.

Be sure you go online 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.

How can the IRS revoke my tax exempt status when I never applied for it?

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Carol,
About 15 years ago a couple of moms started a homeschool summer sports group. About 8 years ago, two leaders opened a bank account. The bank set them up with a “Club” account and secured a federal ID number (EIN) for the club. We never applied to the IRS for anything. We never filed any annual reports (the Form 990-N).

Now from reading your website and our emails, it sounds like our tax exempt status was revoked and we need to get it back.

How can something we never had (501c7 Social Club status) be revoked? 

Your help in clarifying this is appreciated, so we know how to move forward.

Lisa

 

Lisa,

I know this is confusing.

Your sports group is a recreational club that fits the IRS definition of 501(c)(7) social club.

501(c)(7) Social Clubs can “self declare” their tax exempt status without officially applying. Technically, you “self-declared” your tax exempt status when you said you “never applied to the IRS for anything.”

Since 2007, the IRS has required all tax exempt organizations, even those that self-declared their tax exempt status, to file the annual Form 990N.  Read more here: https://homeschoolcpa.com/irs-form-990n-faq/

Your organization failed to file the 990-N for three years the and IRS has revoked your “self declared” tax exempt status.

Now you need to file the paperwork (Form 1024) to get back your tax exempt status that you didn’t need to apply for in the first place!

Crazy? YES!
Frustrating? YES!

A lot of small organizations have learned that their tax exempt status had been revoked and they didn’t even know about it!

I don’t think the IRS thought this through. I wish they had not revoked the status of 501(c)(7)s, but they did. I also wish they would allow a simple phone call to get reinstated instead of filing the paperwork and paying the IRS $400 fee.

Here’s the IRS webpage explaining how to get your tax exempt status reinstated. They offer 4 methods.

How to Have Your Tax Exempt Status Reinstated

If you find reading the IRS webpage a bit confusing, feel free to contact me and we can set up a personal consultation by phone to discuss your options.

Carol Topp, CPA

 

Create a board binder of important papers for your homeschool organization

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I was helping a homeschool leader apply for 501(c)(3) tax exempt status for her homeschool co-op when she mentioned that she had created a binder of important papers. That’s an excellent idea!

I suggested she create three binders and share them with her board members, especially:

  • The secretary who is the keeper of the paperwork for the organization
  • The treasurer who is responsible for the annual reporting to the IRS and their state.
  • The board president whose job it is to make sure everyone else is doing their jobs.

All the board members are responsible for management of the nonprofit and compliance with nonprofit laws. Having a binder of important papers that leaders can to pass down future leaders will make sure the organization is managed well and in compliance with all its reporting obligations.

Here’s what to put in your homeschool organization binders:

  • Employer Identification Number (EIN) letter from the IRS.
  • Articles of Incorporation from your state. This should be the official certified copy with a date stamp proving that your Articles of Incorporation were filed with your Secretary of State.
  • Bylaws. Date them so you have the most recent copy.
  • IRS 501(c)(3) determination letter.
  • IRS Annual Information Returns, the Form 990N, 990-EZ or full 990s
  • IRS Form 8822-B to change the contact name associated with your EIN or to change your address
  • Any state annual reports you file. (If you don’t know what reports you need to file with the state, contact me and I can help.)
  • Helpful articles from HomeschoolCPA.com
  • Books by Carol Topp, CPA especially Money Management in a Homeschool Organization
  • HomeschoolCPA.com website.

 

I highly recommend that you laminate or protect in plastic sheets these important documents.

Pass these binders down to the leaders who succeed you!

I’ve created a template for a board binder that you can purchase and create binders for your entire board.

Read more about the Homeschool Organization Board Manual template.

Carol Topp, CPA

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IRS reports your homeschool group needs to file every year

IRS reports for homeschool groups

Your homeschool group should be filing some reports every year with the IRS. Did you know that?

Carol Topp, the HomeschoolCPA, explains what forms homeschool groups should be filing with the IRS in this episode of the Dollars and Sense Show podcast.

Listen to the podcast here

In the podcast, Carol answers common questions from homeschool leaders such as:

  • We were told if our income is under $25,000 a year, we don’t have to file anything with the IRS. Is that true?
  • What changed? We never had to file anything with the IRS before!
  • But we’re not a 501c3 organizations (or don’t want to be), so why do we need to file anything with the IRS?
  • We don’t like government intervention. Why do we need to have anything to do with the IRS?
  • Our homeschool group doesn’t make any profit, so why do we have to file a tax return?
  • We’ve never filed anything with the IRS? We didn’t know we had to! Now what? Will be owe back taxes?

Here’s a helpful FAQ page explaining the IRS Form 990-N.

How to get added to the IRS database to file the Form 990-N.

If all this is new to you, don’t panic!

We can arrange a phone consultation with your homeschool leaders. Together we can sort out what needs to be done.

Contact me here.

Carol Topp, CPA

 

What is the difference between a homeschool support group and a homeschool co-op?

From the Facebook group I Am a Homeschool Group Leader, came this question:

After much reading, I have come up with a question… What is the difference between a homeschool group and a homeschool co-op?

I took over the leadership of our local, small, informal, unincorporated homeschool group last year. We’re a group of families that meet for unstructured socialization/play time twice a month. We offer classes for all age groups, workshops for moms & dads, date nights/coffee nights for moms & dads, monthly field trips, monthly activity days, and even some on-going activity days. After reading Carol Topp’s book  Homeschool Co-ops, and talking with the HSLDA support group liaison in regards to support groups, I am thinking that the group I am in charge of is a style of co-op. Is this right, wrong, both or neither?

-Jacquelyn

 

I make a differentiation between co-op and support groups because their tax exempt status is different in the eyes of the IRS.

Homeschool co-ops have an educational focus and qualify for 501(c)(3) status as educational organizations.

Homeschool support groups have social interaction and support as their focus and the IRS would classify them as 501(c)(7) Social Clubs.

Here’s an article explaining the differences. It includes a chart comparing 501(c)(3) (co-ops) and 501(c)(7) (support groups). Homeschool Groups As Social Clubs.

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As homeschooling grows, I’ve seen support groups change into co-ops and co-ops add support activities. Things are not as clear cut as my chart make it seem! So when I consult with a group I ask about:

  • their activities
  • where do they spend their time and their money?
  • what is the source of most of their income and expenses? (that’s how CPA’s think!)

From hearing about their activities and money, I can usually help discern if their group is a 501(c)(3) (educational co-op) or 501(c)(7) social club (support group).

It sounds like Jacquelyn’s group is a support group. Support groups fit the IRS 501c7 social club status and can “self declare” their tax exempt status without officially applying. (educational organizations with more than $5,000 annual gross revenues must apply for 501(c)(3) status).

But the IRS says all nonprofits-even small support groups- are supposed to be filing the annual Form 990N.  Read more here: https://homeschoolcpa.com/irs-form-990n-faq/

For Jacquelyn’s group and hundreds like them, the tipping point comes when the group gets an EIN from the IRS to open a checking account. That’s then the IRS knows about your group and it will need to start filing the annual 990N (it’s online and only 8 question. it takes about 5 minutes once a year).

Important disclaimer: I stated that a co-op is a 501(c)(3) and  a support group is a 501(c)(7), but that is  my interpretation of the IRS tax code. You will not find homeschool groups mentioned in the IRS rules and regulations. (PTL!)  I have discussed homeschool group classifications with IRS employees, read a ton and have attended workshops put on by the IRS. I’m a CPA and homeschooled for 14 years. I still belong to my support group, even though I retired from homeschooling 4 years ago. But I want to make it clear that I am using my CPA knowledge and homeschool experience to help homeschool organizations understand and comply with IRS regulations.

I hope that helps!

Carol Topp, CPA

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P.S. Jacqueline found Homeschool Co-ops: How To Start Them, Run Them and Not Burn Out helpful.

Maybe you would, too.

 

Will getting an EIN put us on the IRS radar?

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Usually the first contact a homeschool organization has with the IRS is getting an Employer Identification Number (EIN). Most banks now request an EIN when a group opens a checking account. One group in Virginia is doing things right by getting a checking account for their homeschool co-op instead of using a personal account, but they wonder if this will mean more contact with the IRS.

Hi Carol,
I am new to an existing homeschool co-op in VA. This co-op is more then 12-15 years old, we do not accept donations or need to, so far we have been handling the money through someone’s personal bank account, we receive fees from students and then pay teachers and reimburse them for materials, generally we break even each year (or can if we need to).

The bottom line is that we want to be able to have a business checking account.

Can we get an EIN in order to open a checking account in our co-op name without incorporating and without having a state or federal annual filing requirement? I seem to remember that once you get an EIN (that I think is required for a business bank account), you are on the radar screen with the IRS and will need to file some sort of return.
Thanks so much,
Nancy in VA

Nancy,

Yes, you need an EIN for banking purposes. It used to be that getting an EIN was the first and last time a small homeschool organizations had to deal with the IRS. But not anymore!

Since 2007, the IRS has required tax exempt organizations (like your homeschool co-op) to file an annual information return, Form 990/990EZ or 990N. Fortunately, for small organizations (under $50,000 annual gross revenues), the Form 990N, is a short online form that asks only 6 questions. Read more here: Form 990N FAQ

If you are paying teachers, then you have some reporting to the IRS and your state government. You will have to pay payroll tax (Social Security and Medicare) and file a W-2 if they are employees or file a 1099MISC if they are independent contractors. You should read this blog entry: Paying co-op teachers is a sticky issue

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Need help understanding tax exempt status or money management in your homeschool group?

Carol Topp’s books are written specifically for the homeschool leader.

 

Carol Topp, CPA

Do You Know About IRS Required Filings for Homeschool Groups?

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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)
E. Website
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

Click Here to get more information! 

 

Church is worried about legal status of homeschool group

The leadership of our church is concerned that our homeschool  co-op does not have any legal status. They suggested that we look into becoming something official, like a 501c3.

The issue is that we are a pretty small group, and the teachers are not paid by the co-op, but by the individual students directly. At this point, there really isn’t any money changing hands. I have a lot of reservations about the 501c3 status, too.

Is there another “legal entity” that our smallish co-op could become that would let us do some basic things like have a checking account? We don’t really have any money to put toward legal fees or anything like that, so it would have to be very inexpensive to set up.

Thanks so much for all your work.

Kerry in Ohio

 

Kerry,

It’s nicest if the church takes you under their tax exempt status as a ministry, but for legal and insurance purposes a lot of churches are reluctant to do that.

Two choices

There are really two legal structures you group can be: nonprofit or for-profit. Most homeschool groups are nonprofits and in addition have tax exempt status from the IRS.

If your gross annual income is under $5,000 per year, you do not have to file any application to be tax exempt with the IRS; you can simply self declare your 501c3 tax exempt status. That’s pretty easy!

You will have to file an annual information return with the IRS called a Form 990-N, but it’s quick and easy. See my 990-N FAQ page here: https://homeschoolcpa.com/irs-form-990n-faq/

If you do not self declare 501c3 status (and file the annual 990-N), then, by default, your organization is a for-profit business. That’s your other legal alternative. The income and expenses would have to be reported on someone’s tax return as a business. The church may not rent space to a for-profit business (my church won’t), so you should read more about nonprofit and 501c3 status.

IRS and Your Homeschool Org cover

My book The IRS and Your Homeschool Organization can calm many of your fears.

I hope that helps.

Carol Topp, CPA