Can a homeschool group be charitable? Maybe not!

I love knowing that  most homeschool groups are generous, especially toward families in financial need. They deliver meals, take up collections, and waive fees for a needy family.

But should a homeschool group serve as a charity?

Maybe, but maybe not.

Here’s a true story..

A homeschool group was given $5,000 with the specific purpose of gifting to members in the group that were experiencing difficult financial times.  They told me, “Our instructions from the donor was to gift it to members that were going through difficult financial times due to unemployment or illness.”

It was very nice of the donor and the organization to have a concern for the afflicted families in their program.

But this homeschool group has 501(c)(3) status as a religious and educational organization. There is no mention of “charitable” purpose in their founding documents (their Articles of Incorporation), or in their tax exempt application with the IRS.

Basically, they were not given tax exempt status to be collecting and distributing funds to needy people (i.e. charity).

Here’s part of what I wrote to them:

In general, your homeschool organization should not serve as a charitable conduit for someone to make a gift to a needy family (or families). The reason is because your 501(c)(3) status was for educational purposes, not charitable to help needy families with financial needs. Additionally, the donor used your homeschool organization to get a tax deductible donation, when he or she should have given the money as a gift (i.e. not tax deductible) to the needy families.

If you told me that you used the $5,000 to start a benevolent fund and reduced the tuition for several families, I’d say the IRS may approve that use of the money. Your homeschool organization is not a “charity” and should not be used to funnel money to a needy family, nor should you let your 501(c)(3) status be used to give a donor a tax deduction for what is a gift to an individual(s).

You were given tax exempt status for specific purposes. Stick to the purposes you told the IRS: educational and religious.

Now, I’m a religious person (a Christian, to be exact), so to me being generous and helping the needy is related my religious beliefs and this homeschool group may argue the same. But they should have been more clear in their explanation to the IRS and their organizing documents.

My advice to them is to:

  1. Not accept donations that are ear marked for helping the financial needs of a family. Direct the donor to other charitable organizations.
  2. Not give cash or checks to a needy family, but instead offer tuition discounts on their program to keep in line with their educational purposes.
  3. Not let your homeschool organization be used as a conduit for financial transactions that are outside of your exempt purpose.

All homeschool leaders should pull out their founding documents (their Articles of Incorporation and bylaws) and their tax exempt application with the IRS (Form 1023 or 1023-EZ) to refresh their memory on their organization’s stated purpose.

Then stick to that purpose.

The Homeschool Organization Board Manual will help you keep your important documents  in a binder for easy access.

Your board may wish to create a donation acceptance policy and include the 3 points above.

Carol Topp, CPA
HomeschoolCPA.com

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DIY 501c3 tax exempt status

In 2019 Carol Topp started an ambitious project. She set out to record 3 webinars to hep homeschool groups form a nonprofit and apply for 501vc3 status.

In this podcast she describes these 3 webinars.

Create a Nonprofit Organization for Your Homeschool Community

501c3 Application for Homeschool Nonprofits

IRS and State Filings for Homeschool Nonprofits

(click each title for details)

The 3-video set plus resources, ebooks, checklists, etc. sells for $50

This 3-webinar set is great for:

  • Brand new start up homeschool groups
  • Existing groups that never formed as a nonprofit
  • Existing groups that never applied for 501c3 tax exempt status
  • Homeschool communities run as a business that want to convert to be a nonprofit organization

Learn more about this 3-webinar set to apply for 501c3 tax exempt status.

Does bank account need to be less than $5,000 to be self declared tax exempt?

We are a small group (43 families) starting a non-profit. We have used several of your free and purchased resources. Thank you for your work in this space.

Question…does the opening balance of the bank account need to be less than $5,000 to remain self declared?

We will be receiving about $5,000 from a now defunct homeschool group to help us start off.

Our annual income won’t exceeded $5,000, so we plan to self-declare our 501c3 tax exempt status. Will the account balance of over $5,000 be considered income of over $5,000?

Thank you in advance for any information you may provide.

 

 

Thank you for contacting me.  I’m glad my resources have been helpful.

You asked, “..does the opening balance of the bank account need to be less than $5,000 to remain self declared?
No. The IRS only looks at the annual gross revenues, not bank balances.

If the original groups wants to gift the new organization $5,000, that would be income (a donation) in the year it is received.  So that large donation could mean the new group has over $5,000 in gross revenues in that year.

But the IRS guidance* for self declaring 501c3 tax exempt status says:
normally not more than $5,000.”

A one time large gift would not be “normal,” so the organization could still self-declare 501c3 tax exempt status if your normal gross revenues are under $5,000/year. 🙂

I hope that helps!

* Source: Instructions for Form 1023 page 1 “Form 1023 not necessary.”

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

What does it cost to get tax exempt status?

How much does it cost to be a 501c3? My homeschool group is new and we don’t have a lot of money.
-Homeschool leader

 

Dear homeschool leader,

It’s not as expensive to apply for 501c3 tax exempt status as it used to be, especially if your organization is small (revenues less than $50,000/year) and is eligible to file the shorter IRS Form 1023-EZ.

Here’s an explanation of the cost to get 501c3 status from my webinar on 501c3 Application for Homeschool Nonprofits

This webinar (90 minutes total length) will explain the benefits of tax exempt status, the application process and walk you through the application Form 1023-EZ line-by-line. At the end of the webinar you’ll be equipped to apply for tax exempt status by yourself. The cost of the webinar is $25.

 

Get more information on the webinar 501c3 Application for Homeschool Nonprofits

 

Carol Topp, CPA

HomeschoolCPA.com

Still time to join the IRS and State Filings for Homeschool Nonprofits webinar

Carol Topp, the Homeschool CPA, will help you understand the IRS and state reports and file them yourself! In her webinar IRS and State Filings for Homeschool Nonprofits, Carol will explain the IRS annual returns and how to determine what your state may require as well.

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

The webinar was live in August 2019 but you an purchase the recording for $10.

The webinar will last approximately one hour. There will be time for your questions. It will be recorded for viewing later.

The cost is $10 and you will receive:

  • Access to the live webinar on Wednesday August 21, 2019
  • An opportunity to ask questions via the live chat room
  • Handout of the slides
  • Recording to the webinar
  • IRS Forms, Instructions and samples
  • Template to summarize your state and IRS filing requirements for your board

Carol Topp, CPA

HomeschoolCPA.com

What do you do after your homeschool group has tax exempt status?

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

But you’re not finished with government forms just yet! Your state and the IRS have several reports that must be filed regularly to maintain that precious tax exempt stats.

Almost every homeschool group will have some reporting with the IRS and their state.

Carol Topp, the Homeschool CPA, will help you understand the IRS and state reports and file them yourself! In her webinar IRS and State Filings for Homeschool Nonprofits, Carol will explain the IRS annual returns and how to determine what your state may require as well.

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

The live webinar will be on Wednesday August 21, 2019 at 8 pm ET/7 pm CT/6 pm MT/5 pm PT

The webinar will last approximately one hour. There will be time for your questions. It will be recorded for viewing later.

The cost is $10 and you will receive:

  • Access to the live webinar on Wednesday August 21, 2019
  • An opportunity to ask questions via the live chat room
  • Handout of the slides
  • Recording to the webinar
  • IRS Forms, Instructions and samples
  • Template to summarize your state and IRS filing requirements for your board

 

More information at HomeschoolCPA.com/Filings

 

Carol Topp, CPA

Tiny Homeschool Groups: Do We Need to Pay Taxes?

Tiny Homeschool Groups: Do We Need to Pay Taxes?

Tiny homeschool groups have different challenges than large programs. They are limited on resources, volunteers, and activities. But they still have questions about legal status, money and taxes that the large homeschool organizations have.

In this 4-part podcast series, Carol Topp, CPA answers the common questions that tiny homeschool groups face. All podcasts are available at HomeschoolCPA.com/Podcast

  • Episode #175 Are We a Nonprofit?
  • Episode #176 Do We Need to File Anything?
  • Episode #177 Do We Need to Pay Taxes?
  • Episode #178 Do We Need a Bank Account?

In this episode Carol Topp will explain taxes for tiny homeschool groups:

  • How a tiny homeschool group can be tax exempt without applying.
  • How tiny groups can self-declare tax exempt status with the IRS.
  • State income tax exemption.
  • The IRS annual report Form 990-N.
  • Sales tax for small nonprofit organizations.

 

Join the Facebook group for homeschool leaders: I am a Homeschool Group Leader. 1,000+ homeschool leaders offer ideas, encouragement and respectful exchange of ideas. https://www.facebook.com/groups/72534255742/

 

Featured Product

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

 

 

 

Webinar: IRS and State Filings for Homeschool Groups

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.

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

After the webinar you will be equipped to file on your own the IRS Form 990-N and state forms saving you hundreds of dollars in professional fees.


This webinar is the third in a series of 3 webinar to teach homeschool nonprofit leaders how to create a nonprofit, get and maintain tax exempt status. The other two webinars are:

I highly recommend you watch the first two webinars on Create a Nonprofit for Your Homeschool Community and 501c3 Application for Homeschool Nonprofits. They are both a precursor to this webinar and tells you what to do to create a nonprofit and apply for 501c3 tax exempt status.


This third webinar on IRS and State Filings is for Homeschool Nonprofits if for groups that have received (or applied for) for tax exempt status with the IRS and:

  • Are unsure about IRS annual returns
  • Don’t know what forms their state requires from nonprofit organizations
  • Do fundraisers or ask for donations
  • Received a letter from the IRS or their state about missed reports
  • Need to know what to do to maintain their tax exempt status
  • Want to know what it takes to run a compliant nonprofit organization
  • People who want to DIY the IRS and state flings but need an experienced expert to teach them how.

The webinar will last approximately one hour.

The cost is only $10 and you will receive:

  • A recording of the webinar
  • Handout of the slides
  • IRS Users Guide for Form 990-N
  • Blank IRS Form 990-EZ and Instructions
  • Template to summarize your state and IRS filing requirements

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders maintain tax exempt status.

Is your homeschool group “just a bunch of moms”?

I’ve heard this too many times from homeschool group leaders to ignore it any longer.

“We’re just a bunch of homeschool moms”

It’s usually used along with one of these sentences,

…therefore we don’t want to (or need to) ...

  • be formally structured
  • follow the law
  • pay taxes
  • apply for tax exempt status
  • pay our workers as employees (according to the law)
  • record our income or expenses
  • notify our church host of the for-profit nature of our group, etc…

I’ve heard or read just about every one of these excuses!

Does saying “we’re just a bunch of homeschool moms” imply that:

  • homeschool moms are incapable of running legitimate businesses or nonprofit organizations?
  • homeschool moms can’t understand legal and tax issues?
  • homeschool moms are claiming ignorance as a defense against obeying the law?

Homeschool moms are intelligent, capable women. I know of hundreds of homeschool moms running businesses and nonprofit organizations very successfully and legally. I know some that are accountants and lawyers or, in the true spirit of homeschooling, are self-educated to understand complex tax and legal situations.

So let’s not imply that homeschool moms are not capable or not intelligent by saying “we’re just a bunch of homeschool moms”!

Instead, we should do what we do at home with our children:

Get educated about the legal and financial aspects of running a homeschool organization.

I have resources to help:

 

Carol Topp, CPA

Helping Homeschool Leaders who are smart and capable!

 

How to self declare tax exempt status

In my webinars on Creating a Nonprofit for a Homeschool Community and 501c3 Application for Homeschool Nonprofits, I briefly mentioned that some homeschool groups can self declare tax exempt status.

I didn’t go into detail of HOW to self declare this tax exempt status. This blog post explains the HOW.

Background:

Organizations that are eligible to self declare 501 tax exempt status do not have to apply for tax exempt status with the IRS. So no Form 1023/1023-EZ or 1024 needs to be filed! This saves you time and money! Hooray.

But self-declared tax exempt organizations must still maintain that tax exempt status by filing an annual report with the IRS. This annual filing is Form 990/990-EZ or 990-N.

 

If you are a 501c7 social club:

This status is common for homeschool support groups that focus on social activities and clubs rather than on educational activities

Self declare tax exempt status

Since you have not applied for 501(c)(7) status  (you can “self declare” 501(c)(7) status and don’t have to file the paperwork), you are not in the IRS database (yet) so you will not be able to file the 990-Ns. You will need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their Exempt Organization 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.

Tips when calling the IRS

Say something like this,

“We’re a brand new 501(c)(7) Social Club and we needed to get added to the IRS exempt organization database so we can start filing our 990-Ns.”

 


If you are a 501c3 Educational Organization

This status is common for tiny homeschool groups including co-ops, tutorials, youth sports, music and arts organizations that focus on educational activities.

Your organization’s total gross revenues must be less than $5,000 per year to be eligible to self declare 501(c)(3) tax exempt status.* 501(c)(7) social clubs mentioned above do not have that $5,000/year limitation. They can have gross revenues of more than $5,000/year and still self-declare tax exempt status.

Read about the difference between 501(c)(7) Social clubs and 501c3 organizations.

Since you have not applied for 501(c)(3) status, you are not in the IRS database (yet) so you will not be able to file the 990-Ns. You will need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their Exempt Organization database so you can begin filing the Form 990-Ns.

Tips when calling the IRS

Say this: “We’re a small 501(c)(3) educational organization with revenues of less than $5,000 per year. We understand we can self-declare our 501(c)(3) tax exempt status. We’d like 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. 501(c)(3) s with more than $5,000/year in revenues must apply for501(c)(3) status using Form 1023 or the new, shorter Form 1023-EZ.


For both  501c7 Social Clubs and 501c3 Educational Organizations

During your call with the IRS, they will ask for your EIN and organization’s name, address, and probably a contact name. Have all that ready before you call.

They may also ask what 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. You get to pick it!

They may ask if you have “organizing documents.” They mean bylaws, Articles of Association (or Articles of Incorporation). So tell them if you have bylaws or Articles of Association/Articles of Incorporation. Samples can be found here.

Call the IRS early in the morning. They open at 8 am local time 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.

Don’t forget to the the 990-N every year!

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.

So if you operate on a calendar year, the 990-N is due May 15. If your fiscal year ends June 30, the From 990-N is due November 15 every year. File it at IRS.gov/990n

 

Have more questions about your homeschool organization’s tax exempt status? My book, The IRS and Your Homeschool Organization would be a big help.

 

 

 

 

If your 501(c)(3) educational organization grows and has more than $5,000 in revenues per year, it’s time to officially apply for 501(c)(3) tax exempt status.

This webinar 501c3 Application for Homeschool Nonprofits will explain how to do that.

 

Carol Topp, CPA

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