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

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

 

 

 

Apply for 501c3 Tax Exempt status on your own (this webinar will show you how!)

I’ve helped over 90 small nonprofit organizations apply for 501c3 status using IRS Form 1023-EZ.None have ever been denied by the IRS.

Would you like to know what I know?

I share my experience, tips, and even a few secrets that I only share with my clients in a webinar

501c3 Application for Homeschool Nonprofits 

This webinar is for:

  • People who want to DIY (Do It Yourself) in applying for 501c3 tax exempt status but need an experienced expert to teach them how.
  • New homeschool groups formed as nonprofit organizations that want tax exempt status
  • Homeschool groups that have been around a while but never applied for 501c3 tax exempt status
  • A homeschool business that wants to convert to be a nonprofit and get tax exempt status
  • Homeschool leaders who have heard about tax exempt status, but don’t understand the steps to take.

You will learn:

  • The difference between nonprofit and tax exempt status. They are not the same thing!
  • The pros and cons of tax exempt status
  • How you could avoid applying at all, yet still get all the advantages of 501c3 status
  • What is needed before applying for tax exempt status
  • The cost and steps to take
  • An explanation of the IRS Form 1023-EZ line-by-line. This will be the crux of the webinar and will help you prepare your own 501c3 application!
  • Tips on filing the IRS Form 1023-EZ from Carol’s experience of filing over 90 applications!

After the webinar you will be equipped to file on your own the IRS Form 1023-EZ, saving you hundreds of dollars for professional help.

The cost is $25. 

What  you get for $25:

  • Webinar recording. The webinar lasts approximately 1.75 hours.
  • Handout of webinar slides
  • ebook The IRS and Your Homeschool Organization by Carol Topp, CPA
  • Sample Form 1023-EZ for your reference
  • BONUS: If you feel you need additional assistance, we can arrange a phone consultation. I will discount my hourly rate from $85 to $60/hour, so this webinar pays for itself!

This is the second part of a 3-part webinar series

The first webinar Create A Nonprofit for Your Homeschool Community is available now. I highly recommended to watch this webinar first, if you haven’t done so already!

The final webinar IRS and State Filings for Homeschool Nonprofits will air in August 2019.


Carol Topp, CPA

HomeschoolCPA.com

Webinar: 501c3 Application for Homeschool Nonprofits

Have you heard that applying for 501c3 tax exempt status is difficult, time consuming and expensive? Well, it can be, so Carol Topp, CPA the HomeschoolCPA wants to make applying for 501c3 tax exempt status a lot easier for you!

So easy, you can do it yourself!

In this webinar 501c3 Application for Homeschool Nonprofits Carol shares her tips and secrets to apply for 501c3 tax exempt status with the IRS.

You will learn:

  • The difference between nonprofit and tax exempt status. They are not the same thing!
  • The different types of 501c organizations there are and which are most common for homeschool groups
  • The pros and cons of tax exempt status
  • How you could avoid applying at all, yet still get all the advantages of 501c3 status
  • What is needed before applying for tax exempt status
  • The cost and steps to take
  • An explanation of the IRS Form 1023-EZ line-by-line. This is the crux of the webinar and will help you prepare your own 501c3 application!
  • Tips on filing the IRS Form 1023-EZ from Carol’s experience of filing over 90 applications!
  • What filings may be required by your state (in addition to the IRS)

After the webinar you will be equipped to file on your own the IRS Form 1023-EZ, saving you hundreds of dollars for professional help.

Watch a preview:

The cost is $25.  The webinar runs approximately 1.75 hours.

What  you get for $25:

  • Access to the webinar recording
  • Handout of webinar slides
  • Sample Form 1023-EZ for your reference
  • ebook The IRS and Your Homeschool Organization by Carol Topp, CPA
  • BONUS: If you feel you need additional assistance, I will discount my hourly rate from $85 to $60/hour if you have purchased the webinar.

This is the second part of a 3-part webinar series

The first webinar is Create A Nonprofit for Your Homeschool Community. I highly recommended to watch this webinar first, if you haven’t done so already!

The final webinar IRS and State Filings for Homeschool Nonprofits will air in August 2019.


Carol Topp, CPA

HomeschoolCPA.com

Inurement: a funny word the IRS doesn’t like!

The IRS uses an unusual word that most of us don’t know the meaning of: inure or inurement. Here’s how the IRS uses it in their definition of a 501(c)(3) tax exempt organization:

A section 501(c)(3) organization must not be organized or operated for the benefit of private interests, such as the creator or the creator’s family, shareholders of the organization, other designated individuals, or persons controlled directly or indirectly by such private interests. No part of the net earnings of a section 501(c)(3) organization may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization. (emphasis added)

Source: https://www.irs.gov/charities-non-profits/charitable-organizations/inurement-private-benefit-charitable-organizations

What does inurement mean?

“Inurement” means “benefit.”  The IRS forbids a tax exempt organization to use its income or assets to directly or indirectly benefit an individual, a person with a close relationship with the organization or a person who is able to exercise significant control over the organization. These can be board members or donors.

Jeramie Fortenberry an attorney, gives an excellent explanation of inurement in his website article “The Inurement Prohibition & Non-Profit Organizations.”

Non-profit organizations are subject to what is known as the nondistribution constraint.  Simply stated, this means that non-profit organizations cannot distribute profits to those who control it.  The nondistribution constraint is the fundamental distinction between non-profit organizations from for-profit organizations.  (emphasis added)

Any time assets of the organization flow through to benefit the organization’s insiders, whether directly or directly, inurement is an issue.

What are some examples of inurement?

  • A nonprofit executive used the organization’s money to pay his child’s college tuition, lease a luxury car for his wife, have his kitchen remodeled, and rent a vacation house at the beach.
  • The CEO at a tax-exempt hospital used charitable assets to pay for personal items such as liquor, china, crystal, perfume, an airplane, and theater tickets.
  • A nonprofit art gallery exhibits artwork created by its members for a fee but grants board members the same service without cost.
  • The nonprofit organization’s sole activity is conducting seminars and lectures based on the program owned by its president and his for-profit company.
  • An educational organization had four board members who voted themselves free tuition to the program for their children. This benefit ranged from $2,000-$4,000 per board member per academic year.

Sources: https://www.nolo.com/legal-encyclopedia/what-is-private-inurement.html and https://boardsource.org/resources/private-benefit-private-inurement-self-dealing/ and https://www.forpurposelaw.com/the-private-benefit-rule-three-more-examples/

What happens if a nonprofit practices inurement?

I would hope inurement would never happen in a homeschool group, by Mr. Fortenbury discusses the IRS’s options against a nonprofit organization.

The inurement restriction is absolute: An organization that violates this prohibition will not qualify (or will cease to qualify) for tax exemption.

In cases involving inurement, the IRS may impose the penalties in lieu of or in addition to the revocation of tax exempt status. 

This system effectively gives the IRS two options to enforce the nondistribution constraint.  In blatant violations of the inurement prohibition, the IRS can both revoke tax exemption and impose monetary penalties under the intermediate sanction regimes. In less severe cases, the IRS may seek to correct the situation through intermediate sanctions alone.

For the full article visit: https://www.fortenberrylaw.com/inurement-prohibition-nonprofit-organizations,

 

So, please homeschool leaders, stay away from inurement (giving benefits or the assets that belongs to the nonprofit) to any insiders (those who exercise control over the organization).

We’re homeschoolers and we’re better than that.

Carol Topp, CPA

Create a Nonprofit Organization for Your Homeschool Community


Can a homeschool community of families become a nonprofit? What if it is currently a business?
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

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

Who should watch the webinar?

  • Brand new start up homeschool groups
  • Existing groups that never formed as a nonprofit
  • Homeschool communities run as a business that want to convert to be a nonprofit
  • Leaders that are unsure if their homeschool group is a business or a nonprofit. It can be confusing!

 

Watch a preview:

 

The webinar fee is $10. Yes only $10.

You will receive:

  • A link to the recording of the video (90 minutes). Watch anytime (just bookmark the link)
  • A copy of the slides from the webinar


Thank you for this webinar! It was great!-Alicia, homeschool leader
Thank you! It was very informative!-Rhonda, live attendee


UPDATE: The follow-on to this webinar is 501c3 Application for Homeschool Nonprofits. It walks you though the IRS Form 1023-EZ application line-by-line. You will be ready to apply on your own after watching this webinar.

 

Your host:

Carol Topp, CPA is the owner of HomeschoolCPA.com and has assisted more than 150 homeschool organizations apply for 501c3 tax exempt status. She is the author of 15 books.

 

 

 

Making Sure Your Nonprofit Organization is Compliant

 

A lot of homeschool leaders ask me,

“What do I need to do after my homeschool gets nonprofit or tax exempt status?”

They are asking about being compliant with the laws of our land, both federal and sate.

This article Making Sure your Nonprofit Organization is Compliant from MoneyMinder.com has a great article that explains compliance in these areas:

Tax Exempt Status which includes federal income tax exempt granted by the IRS, and sales tax exemption from your state. Your nonprofit may even be eligible for property tax exemption if your own a building. The laws on sales tax and property tax exemption vary by state.

My article explains the IRS filing requirements Do You Know About Required IRS Filings? for tax exempt organizations.

Register with the State Registration laws vary from state to state but most require you to confirm your active status (especially if you are formed as a nonprofit corporation), contact information, mailing address, and name of board members. This reporting is usually to the Secretary of State’s Office.

Charitable Solicitations
Many states ask that you register before actually asking for donations or fundraising. This registration is usually to the Attorney General’s office in your state.

Donation Receipt Requirements
A donor should be given a receipt for any single contribution of $250 or more. The article gives more details on what your donation receipt should say.

 

To research what your state compliance requirements are visit this helpful website

https://www.harborcompliance.com/information/nonprofit-startup-guide.php

If you wish, I can research your state’s requirements and compose a letter explaining what you should do next for filing in your state. I will charge $50 for the research and letter. Just let me know if I can help you in this way.

 

I hope that helps you know what it takes for your homeschool nonprofit to be compliant in your state and with the IRS.

 

Carol Topp, CPA

HomeschoolCPA.com

How to Convert Your Homeschool Business into a Nonprofit Organization

 

 

Sometimes a homeschool group that started as a for-profit business wants to convert to a nonprofit organization.

Can that be done? Yes!

How hard is it?

How costly is it?

What steps do I take?

 

I’m offering a webinar on How to Convert Your Business into a Nonprofit Organization for Homeschool Programs

Now it has a new name!

Create a Nonprofit Organization for Your Homeschool Community

This is a slight name change from the original webinar. As I was preparing the slides, I realized that the information I was sharing was broad enough to be helpful to anyone starting a new homeschool nonprofit or converting a business to a nonprofit. So I re-named the webinar and I also reduced the price to $10 to make it affordable to more people.

The webinar will be airing live on Monday April 22, 2019 at 8 pm ET/7 pm CT/6 pt MT/5 pm PT.

 

The goal of this webinar is to equip homeschool leaders with an understanding of how to form a nonprofit. You will understand:

  • The steps to take
  • What documents need to be filed and with who
  • The cost and time commitment
  • How to determine if this is a viable option for your homeschool program to pursue

The webinar will cover:

  • 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

A follow up webinar will cover the IRS Form 1023/1023-EZ Application for 501c3 Tax Exempt Status. It will air sometime in June 2019.

Who should register?

  • Brand new start up homeschool groups
  • Existing groups that never formed as a nonprofit
  • Homeschool communities run as a business that want to convert to be a nonprofit
  • Leaders that are unsure if their homeschool group is a business or a nonprofit. It can be confusing!

The webinar fee is $10. 

You will receive:

  • Access to the live webinar with a chat room to ask questions
  • A link to the recording of the video to watch later
  • A copy of the slides from the webinar

 

Your host:

Carol Topp, CPA is the owner of HomeschoolCPA.com and has assisted more than 150 homeschool organizations apply for 501c3 tax exempt status. She is the author of 15 books.