Speech and Debate Club – Unsure of Its Setup?

Carol Topp, the Homeschool CPA, is frequently asked by small homeschool groups if they are setup up correctly.

Do they owe taxes?

Do they need to be a nonprofit corporation?

Henry  writes, “Can a small homeschool education club focused on speech and debate be categorized as an “unincorporated association” and therefore not apply for recognition by the IRS and not file taxes?

Less than $2,000 pass through the club to pay for insurance and facilities…

This club formed in 2015 and I joined last year and become the director this year. I am wondering if we are structured correctly…”

Listen to Carol’s reply to Henry’s questions on today’s episode of the Homeschool Leader podcast.

  • Can the Speech and Debate Club be a 501c3?
  • Do they need to be a formalized entity?
  • Should they get an EIN?
  • What should they do to be structured correctly?
  • Do they owe taxes?

In the podcast, Carol mentioned how a small nonprofit like Henry’s club can self-declare 501c3 tax exempt status. Carol has a few blog posts on self-declaring 501c3 tax exempt status and the filing the IRS annual notice, Form 990-N:

https://homeschoolcpa.com/how-to-get-added-to-the-irs-database-and-file-the-form-990n/

https://homeschoolcpa.com/irs-form-990n-faq/

In the podcast I mentioned my book 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

The webinar Create a Nonprofit for Your Homeschool Community is also helpful.

The webinar is 90 minutes and covers:

  • The difference between a business and a nonprofit
  • What are the advantages and disadvantages of being a nonprofit
  • Forming a board: who can be one it, what do they do, etc.
  • Creating bylaws
  • Drafting a budget
  • Setting up a bank account
  • Forming a nonprofit corporation in your state
  • The timeline to get this all done
  • The expense to accomplish this

Conflict of Interest: Paid Teachers as Board Members in a Homeschool Group

A homeschool leader is concerned about a conflict of interest if she wants to be a board member and paid teacher.

Jessica, who wants to start a homeschool co-op emailed HomeschoolCPA Carol Topp this situation:

“I have a question about the conflict of interest issue. Three ladies and I would like to incorporate to teach classes together and form a co-op. If we are the three board members, then does that mean we cannot profit by also teaching? Do you have any article that clarifies that?”

Listen as Carol explains:

  • The conflict of interest between being on the board and being paid by a nonprofit
  • Inurement and self-dealing
  • Why it is not a good practice for nonprofit to have paid staff also serve as board members.
  • Three options Jessica has:
    • Form a 3-way partnership (a for-profit business)
    • Have a separate, independent board that hires teachers as staff
    • Grow the board so the majority is not paid teachers

Featured Product

In the podcast I mentioned my webinar Create a Nonprofit for Your Homeschool Community

What are the advantages and disadvantages of being a nonprofit?

Forming a board: who can be one it and what do they do?

How hard is it?
What are the steps to take?
How fast can it get it done?
How much will it cost?

I have recorded a webinar to answer all these questions and more!

Create a Nonprofit Organization for Your Homeschool Community

Top 10 Tips for Homeschool Leaders: Insurance and Record Keeping

 

Homeschool leaders sometimes wonder when they need an insurance policy. And what type of policy do they need?

 

In this episode Carol Topp, CPA discusses the various types of insurance a typical homeschool group might need. Additionally, homeschool leaders get a few tips on record keeping and reimbursements for expenses.

 

This is the final part of a 5-part series on Top 10 Tips for Homeschool Leaders, a workshop given to homeschool leaders in Wichita, Kansas

 

 

Each episode can be found at HomeschoolCPA.com/Podcast. In the 5-part podcast series Carol will cover:
Episode # 180 Board duties
Episode # 181 Bylaws
Episode # 182 Preventing fraud
Episode # 183 Paying Workers
Episode # 184 Insurance and Record keeping

 

Featured Resource:

Webinar on Financial Statements

In the webinar Carol mentioned record keeping, reimbursements, and financial statements. To help homeschool leaders, especially treasurers, Carol has a free webinar on Financial Reports for Homeschool Groups. She shows you good, bad and really ugly financial reports!

Watch the webinar (no cost) here.

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Top 10 Tips for Homeschool Leaders: Paying Workers

 

Lots of homeschool groups hire and pay teachers to conduct classes. Sometimes these teachers are homeschool parents, but sometimes they are professional instructors. Homeschool leaders have a lot of questions about paying teachers and other workers.

 

 

Topics in this episode include:

• Independent Contractor or employee
• The factors the IRS considers in classifying workers
• What if parents pay teachers directly?
• How paying teachers affects your church host
• Can Independent Contractors receive tuition discounts

This is the fourth part of a 5-part series on Top 10 Tips for Homeschool Leaders, a workshop given to homeschool leaders in Wichita, Kansas.

Each episode can be found at HomeschoolCPA.com/Podcast. In the 5-part podcast series Carol will cover:
Episode # 180 Board duties
Episode # 181 Bylaws
Episode # 182 Preventing fraud
Episode # 183 Paying Workers
Episode # 184 Insurance and Record keeping

 

Featured Resource:

Paying Workers in a Homeschool Organization
Are you paying workers in your homeschool organization?

• Can a volunteer be paid?
• Should a worker be treated as an employee or independent contractor?
• Do you know the difference?

Homeschool leader and CPA, Carol Topp, has the answers to your questions in her book Paying Workers in a Homeschool Organization.
This 130 page book covers paying workers as employees or independent contractors. There are also chapters on paying volunteers and board members. It includes sample forms, tips and advice to help you pay workers in accordance with the IRS laws to help your organization pay their workers correctly. Written specifically for homeschool organizations.

 

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Top 10 Tips for Homeschool Leaders: Preventing Fraud

 

Let’s hope fraud or embezzlement never happens in your homeschool group! Do you have safeguards to spot it and prevent it?

In the podcast Carol mentions her list of “Best Practices to Prevent Fraud.” Find it here.

 

This is the third part of a 5-part series on Top 10 Tips for Running a Homeschool Group, a workshop given to homeschool leaders in Wichita, Kansas. You will probably find many of the audience questions would be a question you might ask as well!

Each episode can be found at HomeschoolCPA.com/Podcast. In the 5 part podcast series Carol will cover:

Episode # 180 Board duties

Episode # 181 Bylaws

Episode # 182 Preventing fraud

Episode # 183 Paying Workers

Episode # 184 Insurance and Record keeping

 

You might find Carol’s podcast series for Tiny Homeschool groups helpful

Tiny Homeschool Groups: Are We a Nonprofit?

 

Featured Resource

Money Management in a Homeschool Organization

  • Does your homeschool group manage their money well?
  • Do you have a budget and know where the money is spent?
  • Do you know how to prevent fraud?

This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.

Click here for more information

 

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Reimbursement policy for a homeschool group

We discussed during our phone call the need to require receipts from our homeschool program’s teachers before they are reimbursed. I have some board members that are concerned. They are afraid it will be seen as more trouble than it’s worth and that we will have fewer moms volunteer. Their question is whether receipts are necessary.

-BW

 

BW,

Reimbursements…yes, the paperwork and receipts are necessary, because if your homeschool organization gives a volunteer a check without getting a receipt from her, it is considered taxable income to the volunteer teacher (under what the IRS calls a “nonaccountable plan”).

But if the volunteer teacher gives you a receipt, then the money your homeschool group pays her is NOT taxable income to her.

Here’s a blog post you should share with your board: No receipts for expenses can get you in trouble!

Your homeschool program should have a reimbursement policy that is an “accountable plan” to avoid your volunteers having to report the reimbursement as income on their tax return.

To be an accountable plan by the IRS, your reimbursement plan must include all three of the following rules:

  1. The expenses must have a business connection; that is, the expenses must have been paid or incurred while performing services as an employee (or volunteer) to your organization.
  2. The volunteer or employee must adequately account for these expenses within a reasonable time (typically within 120 days). Your homeschool organization must require volunteers/employees to give you detailed information on these expenses, including date, time, place, amount, and  purpose for the expense.  Lots of homeschool groups create a reimbursement form. I offer a sample here (it’s an Excel spreadsheet so you can edit it if you like).
  3. You must require the volunteer or employee to return excess reimbursements within a reasonable and specific period of time (usually 60 days). This is applicable if you give money in advance to a volunteer. Giving and advance is not typical in homeschool groups, but a few groups have told me that they give advances to some volunteer teachers.

If all three of these requirements are not met, the plan is determined by the IRS not to be an accountable plan, and any expenses reimbursed to the employee by your homeschool program are taxable to the volunteer!

So now you can see the importance of requesting those receipts (and having an accountable plan)!

Better yet, use my sample reimbursement form (opens an Excel spreadsheet) since it collects all the information required by the IRS to have an accountable plan.

I strongly recommend that your reimbursement policy state that if no receipts are turned in, no reimbursement money will be paid to a volunteer!

 

My book Money Management in a Homeschool Organization offers tips on reimbursement plan and other aspects of managing the money in a homeschool group.

Carol Topp, CPA

HomeschoolCPA.com

 

Income and expenses are a “wash.” Do I have to record them?

I’m treasurer for a nonprofit homeschool group. Every year some of the teachers charge a lab fee and it all gets spent on lab equipment. Do we have to claim that as income or is it just a wash because it’s used for materials or experiments?

Homeschool Treasurer

 

 

Dear Homeschool Treasurer,

You should claim/record the lab fees collected in full as income to your group.

Then also record the lab or equipment expenses to clearly reflect both the income and the expense.

If you don’t record the income, because it is a “wash” (meaning the same as the expenses, so no effect on your profit or surplus), then you are guilty of both under-reporting income and under-reporting expenses.

Your board will not have an accurate picture of all the income and all the expenses.

And you’ll be lying to the IRS! This is obviously more serious if your homeschool group is a for-profit business.

I warn against mixing income and expenses in your bookkeeping in my book Money Management in a Homeschool Organization.

Please take a few minutes and record all your income and all your expenses.

Carol Topp, CPA

HomeschoolCPA.com

Helping Homeschool Leaders

How should a homeschool co-op set up their Quickbooks account?

Do you have something on your website or a resource on how a co-op should set up their QuickBooks accounts?

Michelle

 

Michelle,

I have a few posts about how to set up QuickBooks for a homeschool co-op:

Quickbooks Tips for Homeschool Groups on Sales
What financial reports do we need to generate monthly?

If you receive money in one year, but it’s really for next year (like early registration) then this is helpful:
Deferred Revenues in QuickBooks (opens a pdf file)

 

I actually don’t spend a lot of time talking about QuickBooks on this blog because there are so many good resources our there like this one (check out her QuickBooks tutorials):

5MinuteBookkeeping

A nonprofit called TechSoup has some great videos for using QuickBooks in a nonprofit:

https://www.youtube.com/playlist?list=PLRCtupIatuLkSlhtlXDyo7P7woeHORwgn

Finally, my book Money Management in a Homeschool Organization  has some tips for using QuickBooks like setting up a Chart of Accounts and a who are your “Customers” and what are your “Sales.”
I hope that helps,
Carol Topp, CPA

Holding a fundraiser to pay for homeschool curriculum

Photo credit TheMagicOnions.com

 

I homeschool my 3 children and 3 children of another family. As a project, we learned how to create a school website and as a idea to raise money for curriculum, supplies and hopefully a field trip or two. We’re in NC and also considered a private school.

We thought of an idea to sell Fairy Gardens that we personally make and accept donations on our website. Am I breaking any laws by not being registered as a business or non profit? 100% of profits will be spent on the school, but it goes to my own PayPal account and I state on the website that receipts for the donation being spent on the school and states that the donations are not tax deductible.

It dawned on me that it might not be allowed to do this without some kind of permit. I’m not sure though because I would be allowed to make fairy gardens and sell at a yard sale, so is it different if I sold them online?

Also, can I be a non-profit since I homeschool the children of two families and not just my own? I would greatly appreciate your feedback on this and thank you so much for all of the knowledgeable information you’ve shared on your site!

Best wishes,

April in North Carolina

 

 

April,
You and the other family are not a nonprofit organization, even if North Carolina classifies your homeschool as a private school. Private school  only means you are not funded with public (i.e. government) funds. It does not make you or your business a nonprofit organization. (BTW, some private schools are for-profit businesses.)

In order to be a tax exempt nonprofit, the IRS says you must be operated and organized as a nonprofit.

A tax exempt nonprofit organization “must not be organized or operated for the benefit of private interests” (Source: https://www.irs.gov/charities-non-profits/charitable-organizations/exemption-requirements-section-501c3-organizations).

So benefiting only you and the other family is “private interests” and not serving a public good, therefore you cannot be a nonprofit organization with only two families getting all the benefits.

Your fairy garden business is NOT a nonprofit. It is a business, probably a micro business. Stop calling your sales “donations.” They are simply sales of products (fairy gardens in your case) by a business.

You probably need to register in North Carolina as a business and probably get a vendors license to collect and pay sales tax.
Better start googling “Start a small business in North Carolina.”

 

My books Micro Business for Teens could help your children start this as their business (not yours) and learn a lot too!

 

 

 

 

 

 

Additionally, your comment about selling your products at a yard sale is not quite correct. You can sell fairy gardens at a yard sale, but then you’re running a business and the profit is taxable. In yard sales, you are generally selling household items you bought over many years and used personally and selling them for less than you paid for them. But that’s not true for your fairy gardens. You did not use them personally and you are selling them at a profit, so it’s a business and you should register it and apply for a vendor’s license.

 

Carol Topp, CPA

A homeschool group is using free Paypal. Is that legit?

Hi Carol!

Our small homeschool group set up our business account with PayPal to collect payments from our families.

A friend/homeschool leader said we should accept money through the “friends and family” option on PayPal and avoid the PayPal fees. I didn’t even realize this was an option for a business account, but it is. I’m not sure if that’s legit. 

What scenario would I ever accept money via friends and family?

Thanks so much for your service to us homeschooling mamas!

-V, a homeschool group leader

 

Dear V,

Since you are accepting payment for rendering a service, you cannot avoid the PayPal fee.

To use the “friends and family” option would be deceitful.That option is for true transfers of money among friends, but not if your group is getting paid for rendering a service.

No one likes paying fees, but PayPal is doing your organization a service (processing credit card or debit card payments) and you should expect to pay for that service. You may have to increase your fees to the families a bit to cover the extra expense, but paying the Paypal fees is the correct, proper and legal way to run your homeschool group.

Carol Topp, CPA

HomechoolCPA.com

 

Have more questions about managing the money in your homeschool group? My book Money Management in a Homeschool Organization may be just what you need!

Money Management for Homeschool Organizations

Does your homeschool group manage their money well? Do you have a budget and know where the money is spent? Do you know how to prevent fraud? This 115 page book will help you to open a checking account, establish a budget, prevent mistakes and fraud, use software to keep the books, prepare a financial statement and hire workers. Sample forms and examples of financial statements in clear English are provided.


Paperback $9.95

Ebook(pdf) $3.99

Kindle $3.99