How the IRS sees homeschool groups (podcast)

IRS and homeschool groups

UPDATE: This podcast episode originally aired in 2015. But it is still accurate and helpful in 2021, 6 years later!

In this episode of the Dollars and Sense Show podcast, host Carol Topp continues her topic “Who’s Afraid of the IRS?” and discusses how the IRS sees homeschool co-ops, nonprofit incorporation, for-profit homeschool groups, and what happen when a nonporift loses its 501(c)(3) tax exempt status.

Listen to the podcast

Listen to the first part of this presentation where Carol discussed homeschool support groups as IRS 501(c)(7) Social Clubs and co-ops as 501c3 Educational organizations.

Get a copy of the handout.

More information

Carol mentioned the article “Do You Know About IRS Required Filings for Homeschool Organizations?” Get it here.

Carol’s book, The IRS and Your Homeschool Organization, is available here.

The IRS and Your Homeschool Organization

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Who’s Afraid of the IRS? (podcast)

IRS and homeschool


UPDATE: This podcast episode originally aired in 2015. I am amazed at how accurate it still is 6 years later!


Are you afraid of the IRS? Should you be?

How does the IRS see homeschool organizations?

In this episode of the Dollars and Sense podcast, host Carol Topp, CPA discusses how the IRS sees homeschool organizations. Carol discusses homeschool support groups as IRS 501(c)(7) Social Clubs and homeschool co-ops as 501(c)(3) educational organizations.

Listen to the podcast here

Get a copy of the handout Who’s Afraid of the IRS Handout

More information

The second part of this podcast presentation, “How the IRS sees homeschool groups”

Carol mentioned the article “Do You Know About IRS Required Filings for Homeschool Organizations?” Get it here.

Carol’s book, The IRS and Your Homeschool Organization.

The IRS and Your Homeschool Organization

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Ideas of easy fundraisers for homeschool groups

DSS#30Graphic

UPDATE: This podcast episode originally aired in 2014, but it is still very applicable in 2021, except that Box Tops has now gone digital! No more clipping coupons. 🙂



Your homeschool organization probably looks for extra ways to bring in money. Carol Topp, the Homeschool CPA, shares ideas for easy fundraising in this episode of the Dollars And Sense Show podcast.

Listen to the podcast here

Show Notes

Coupon and reward programs
Box Tops for Ed cation. Need 501c3 status
Shopping reward like Kroger Plus program
E Scrip

Food as a fundraiser
Pizza sales, bake sales to members
Candy, popcorn sales to public could impose a reporting to you state’s AG office
Restaurant (Chik-Fil-A) give a percent of proceeds from one night to your organization
Dinners as fundraisers

Donations
Via email, website, crowd funding, etc
Read-a-thon or walk-a-thon
Car washes and bake sales

Sell products
Ideas at TopSchoolFundraisers.com
Used curriculum sale. Charge an entrance fee, or a table fee to the sellers (or both!)

Reporting the Fundraiser income:
The IRS considers fundraisers to be unrelated to your nonprofit purpose and therefore, subject to taxation. Exceptions to the Unrelated Business Income tax:

  • Under $1,000 income from fundraisers in a year
  • All volunteer labor (no hired help to run the fundraiser)
  • Not regularly carried on
  • Selling donated items

State Charity Registration for fundraisers

Your state may require reporting to their Charitable oversight agency (usually the state Attorney General) if you sell to the public or solicit donations from the public. Some exceptions to registering with your state include: only making sales to your members, a dollar threshold ($25,000 is common), using all volunteer labor for your fundraisers. These exceptions vary by state.

Unsure about what reports your state requires or what exceptions you qualify for? HomeschoolCPA offers a service to research your states laws and required reports. IRS and State Filings Research

Here’s a helpful link to start researching what your state requires. Fundraising Compliance Guide

Warning: No Individual fundraising accounts!
See Scouts don’t allow individual fundraising account (and neither should you!)

More information

Money Management in a Homeschool Organization book

Blog posts on fundraising

Article “Easy Fundraisers for Homeschool Groups”

Unsure about what reports your state requires? HomeschoolCPA offers a service to research your states laws and required reports. IRS and State Filings Research

Money Mgmt HS OrgCover

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Paying Workers in a Homeschool Organization Part 2 podcast

DollarsSenseShow18

UPDATE: I aired this podcast originally in 2014, seven years ago. It’s still very useful and paying workers is a topic that come up frequently for homeschool group leaders. I’ve updated this blog post with a few changes of IRS forms and links.

Do you pay workers in your homeschool organization?

Do you know what form to to filing with the IRS?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 2 of a 2 part series.

Listen to the podcast

Be sure to listen to the first part of this podcast (Episode #17) where Carol explains the difference between employees and independent contractors.

Show Notes:

Applying for EIN. Use IRS Form SS-4. Read this helpful article first Getting an EIN from the IRS. (updated link)

IRS forms to give to independent contractors (IC).

  • Use IRS Form W-9 to collect the IC’s legal name and EIN.
  • Read IRS Pub 15A Employers Supplemental Tax Guide.
  • Give Form 1099-MISC (UPDATE: as of Jan 2021, the Form is now 1099-NEC Nonemployee Compensation) to every IC paid more than $600 in a calendar year. Unfortunately Form 1099-MISC (now 1099-NEC) cannot be printed on your home printer. You must order them from the IRS or buy a set at an office supply store. I use FileTaxes.com (now called Yearli.com) to file and mail Form 1099-MISC. Yeali’s fee is now $5.50-$6.50 per 1099-NEC. (2021)

IRS forms to give to employees

  • Collect a W-4 and an I-9 (Immigration) from each employee. Get employment forms at IRS.gov
  • Read IRS Pub 15 Employers Tax Guide
  • Give each employee a W-2 at the end of the year. (I recommend Yearli.com to file and mail the W-2’s to employees)
  • Form 941 or 944 to pay your employer taxes (Social Security and Medicare). Find employment forms at IRS.gov.  I use Yearli.com to prepare and file 941/944.

What to do if you are paid by homeschool organization an receive a 1099-NEC?

  • File Schedule C Profit or Loss from Business of the Form 1040. List all your income and expenses from being a independent contractor.
  • Pay federal income tax and  self-employment tax (same as Social Security and Medicare for self-employed people) using Schedule SE (attached to your Form 1040.

Helpful Resources

Money Management in a Homeschool Organization

Cover Money Mgmt HS Org

Paying Workers in a Homeschool Organization

And if you are a workers in a homeschool organization and receive a 1099-NEC or need to report your earnings even without an 1099-NEC, this ebook will be very helpful:
Taxes for Homeschool Business Owners


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Paying Workers in a Homeschool Organization Part 1 podcast

DollarsSenseShow17

UPDATE: I first aired this podcast episode in 2014, 7 years ago! How to pay workers is still a common question and issue faced by homeschool groups leaders, so I am updating this post (mostly about my book Paying Workers in a Homeschool Organization which is now a full fledged 130 page book). The podcast is the original from 2014. An oldie, but a goodie!


Do you pay workers in your homeschool organization?

Are they employees or independent contractors? Do you know the difference?

Homeschool CPA, Carol Topp, will share the details of what you need to know about paying workers in a homeschool organization in this 30 minute podcast. Part 1 of a 2 part series.

Listen to the podcast here.

Be sure to listen to the second part of this podcast when Carol shares what forms you need to be filing with the IRS when you pay workers.

Helpful Resources

Carol mentioned a few helpful resources:

Paying Workers in a Homeschool Organization 

Money Management in a Homeschool Organization


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Does my homeschool group have to be tax exempt?

Does my homeschool groups have to be tax exempt? It seems like a lot of work, cost and government intervention.

Many of our members and the board members don’t want to be a 501c3. Do we have to be? We just want to keep things simple.

-Homeschool leader

Dear homeschool leader,

No, your homeschool group doesn’t have to be tax exempt, but then it will owe taxes on any surplus it has each year. I understand the desire to keep things simple, but, trust me, filing a corporate tax return (Form 1120) tax return is NOT simple!

It’s also not as much work to apply for 501c3 tax exempt status you you are fearing, especially of 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 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.

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

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

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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Does a homeschool support group have to apply for IRS tax exempt status?

Our homeschool group was founded a few years ago with the mission of providing support for local homeschoolers. Since then the membership and monies have grown that we needed to establish a bank account.

The bank informed me that our group needed to apply for an EIN number online through the IRS which I did.  However, I found out that we need to file additional paperwork e.g. Form 1024 as a 501(c)7 nonprofit.

We are not a large group and don’t want to apply for a Nonprofit Corporation or 501(c)3 status.  We just want to open an account to deposit monies from membership dues and recently held a rummage sale that all our members donated items to be sold.  We don’t sell services or have paid employees. The monies go to website fees and events that our homeschool members participate in.

Tom

Tom,

From your description of your homeschool support group, it sounds as if you fit the IRS definition of a 501(c)(7) Social Club.

Here’s a blog post about what it takes to be classified as a 501(c)(7) social club
https://homeschoolcpa.com/are-homeschool-support-groups-automatically-tax-exempt/

501(c)(7) Social Clubs can “self proclaim” their tax exempt status and you do not have to file the Form 1024.

Here’s a blog post I wrote on the subject:
https://homeschoolcpa.com/can-a-homeschool-group-self-declare-501c7-social-club-status/

Be sure to maintain your tax exempt status too!

Be aware that while a 501(c)(7) Social Clubs can “self proclaim” their tax exempt status and not file the official IRS paperwork, social clubs must maintain their tax exempt status by filing the IRS Annual Information ePostcard, Form 990-N.

Since you didn’t apply for tax exempt using the IRS Form 1024, you’re not in the IRS database and cannot file the Form 990-Ns. So you need to call the IRS Customer Account Services at 1-877-829-5500 and be added to their database so you can begin filing the Form 990-Ns.

When you call the IRS, say something like this,

“We’re a 501c7 Social Club and my CPA said I needed to get added to the IRS exempt organization database, so we could start filing the 990-Ns.”

This blog post has a few more tips. How to get added to the IRS database and file the Form 990N

Learn more about getting tax exempt status

Tom’s organization wants tax exempt status as a 501(c)(7) social club, but more homeschool groups are eligible for 501(c)(3) status as educational organizations especially if they conduct classes for homeschool students.

For more information on applying for 501c3 tax exempt status as an educational organization check out HomeschoolCPA’s webinars. There’s one specifically on the IRS application Form 1023-EZ.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Pandemic Pods: Are They Homeschool Co-ops?

Pandemic pods. I have been reading about groups of parents gathering to teach their children in small groups called “pandemic pods” because of the COVID-19 pandemic. Sounds like a homeschool co-op, right?

I’ve already had a few parents, teachers, and homeschool group leaders contact me about forming a pod to help school age children have a somewhat normal school-like experience this fall.

They ask me questions like one father, Will in Ohio, asked:

  • Is my pandemic pod a homeschool co-op?
  • Or is it a micro school?
  • If I hire a teacher to help with school work and care for the children in a location that is not my house, are we a daycare?

Excellent questions. Will and I both started reading about homeschool laws, non-public school laws (the micro school option), and daycare licensing in Ohio.

None of current Ohio laws seems to address what Will wants to do.

That’s because we’ve never been faced with a pandemic when public schools had to close their buildings and offer online instruction!

Case Study: Will in Ohio

Will wants to have 6-8 kindergarten and first grader students meet in a non-residential location four days a week (9 am to 2 pm) under the supervision of a hired teacher. He plans to use Ohio’s Virtual Learning option as the curriculum, so the students will be enrolled in their local public school as virtual students.

Additionally, Will has to have his pod set up in about a month. His public school wants parents to enroll their children in about 2 weeks! He’s under the gun. And he isn’t sure that this is a long-term arrangement. It may only last for 3-6 months, so he wants something simple, fast and inexpensive to set up.

Options to Consider:

Here’s what Will is considering and the thought process he went through with of each option:

A home education program (sometimes called a homeschool co-op). Home education is defined in Ohio as “education primarily directed and provided by the parent or guardian of a child.” That didn’t seem to fit what Will was planning since the education would be provided by an in-person hired teacher (and a perhaps virtual teacher from the public school), not the parents. Will is considering reducing the number of hours the pod meets, so that the parents are the primary educators of their children, not he pod teacher.

All students must be legally homeschooled according to Ohio’s homeschool laws. If the students are enrolled in a public virtual school, they are public schooled students and not home schooled students in Ohio.

Each homeschooling parent would have to notify that they are homeschooling and submit a list of curriculum to their local superintendent. Will is not convinced that the pod parents want to homeschool or are able to agree to fewer hours at the pod with the hired teacher.

So forming as a home education program did not look like a viable option for Will’s pod.

A micro school which in Ohio could fall under non-chartered non-tax supported school, also known as “08” schools.

This option requires the students to be in attendance at the school for nine hundred ten hours in a school year. This is more hours than Will was planning for his pod. He may still consider this option but the children will be in school 5 days a week and at least 6 hours each day for 30 weeks.

Additionally, this option in Ohio is for schools that because of truly held religious beliefs choose to not be chartered by the State Board of Education. That may not describe Will’s pod or the pod parents’ convictions.

He also needs to determine how quickly he can establish an “08” school. He will need to contact the Ohio Department of Education and other “08” schools to get their experience.

Daycare for School Aged Children. Will considered having his pandemic pod becoming licensed as a School Age Daycare center in Ohio. The students would be enrolled as public school virtual students. The pod’s hired teacher is really functioning as a daycare provider for school aged students. Ohio requires a daycare license for that.

He is unsure of how soon he can get a daycare license and if he can operate the pandemic pod before getting licensed. He needs to contact the State of Ohio Daycare licensing agency.

So Will is not finding a way to operate his educational pod as he envisioned. He may change his vision by increasing the days per week the students attend the pod and establish as micro school. This will be more expensive for the parents and perhaps time consuming for Will.

Recommended Steps

As you consider opening a pandemic pod, work through each option as Will has done.

Read the homeschool, school, and daycare laws of your state and its limitations. Make lists. Determine where you can comply with the law and where you need to change your plans.

Work with knowledgeable people such as:

  • A Certified Public Accountant (CPA) who understands business, establishing a nonprofit, taxes, and profitability of a “pandemic pod.” Will doesn’t think his pod will be profitable; he is estimating a loss for its first year.
  • An attorney who understands education laws, daycare licensing laws and employment contracts.

Talk to people who have started micro schools in your state. Here are two resources to get you stated.

  • Meridian Learning is a resource and advocacy organization for grassroots microschools.

Determine your level of risk. Will is investigating insurance coverage, looking into safety and health policies, and setting up the pod as either a nonprofit corporation or as a LLC to manage the risks he sees.

Be careful about getting advice of parents on social media. They may live in different state or have set up their programs very differently than you.

Even small things like where your pod meets (in a home or not), the hours per day or days in a year the pod meets, and the number and ages of children in a pod can all determine what laws you need to comply with.

How Can HomeschoolCPA Help?

I can help you if you are interested in starting a homeschool co-op or homeschool educational program for homeschooling families in your state, especially as a nonprofit organization.

I am an accountant with experience in nonprofit organizations and tax exempt status. I am not an attorney. I cannot answer legal questions for you.

I am not an expert in day care licensing, so please don’t ask me daycare questions.

I have consulted with micro school business owners in the past, but at this time I am limiting my consultations to nonprofit homeschool organizations and occasionally business serving homeschool students, especially if they are in Ohio.

I helped Will because he started off thinking he was going to operate a homeschool co-op. It was only in delving into the details that he started investigating other options.

Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders

Planning an Uncertain Future webinar for homeschool leaders is available for viewing!

Carol Topp and three homeschool leaders offered a webinar for homeschool group leaders on planning for an uncertain future this fall (2020).

Here are some of the comments for live attendees:

Enjoyed the webinar very much! Took away some great snippets that have had my head swimming with possibilities for the coming school year. Really excited about this year!

My co-leader and I have much to discuss in the next few days. Things we didn’t realize we should be considering were brought to light. I think, as a result of our attendance last evening, our planning will be more strategic.

Thank you ladies for doing this. Very helpful and insightful. I really appreciate your time in putting this together. ??

The webinar was recorded and is available for viewing:

The webinar panelists discussed:

  • Making Decisions as a Board
  • Planning Tools
  • Social Distancing in a Homeschool Group
  • Ideas from Homeschool Leader Panelists
  • How to Communicate Your Plans to Members

The webinar is offered at no cost to you. We hope it is helpful.


Carol Topp, CPA
HomeschoolCPA.com
Helping Homeschool Leaders