This blog has moved!

October 12, 2009

I’m now answering questions from homeschool leaders at my website/blog combination HomeschoolCPA.com

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All the posts moved with me, so you can still find the information you need over at HomeschoolCPA.com.  See you there!

Carol Topp, CPA


IRS fees will increase January 3, 2010

September 2, 2009

irs

This just released by the IRS. Fees for applying for 501c3 tax exempt status are set to increase January 3, 2010:

User fees will increase for all applications for exemption (Forms 1023, 1024, and 1028) postmarked January 3, 2010:

  • $400 for organizations whose gross receipts are $10,000 or less annually over a 4-year period
  • $850 for organizations whose gross receipts exceed $10,000 annually over a 4-year period
  • $3,000 for group exemption letters.

A complete schedule of all user fees will be published in the annual procedure released in January 2010.

Cyber Assistant, a Web-based software program designed to help 501(c)(3) applicants prepare a complete and accurate Form 1023 appplication, will become available during 2010.  Once the IRS announces the availability of Cyber Assistant, the user fees will change again:

  • $200 for organizations using Cyber Assistant (regardless of size) to prepare their Form 1023
  • $850 for all other organizations not using Cyber Assistant (regardless of size) to prepare their Form 1023.

IRS will announce when Cyber Assistant is available and the effective date of the user fee change.  Subscribe to the EO Update to automatically received an alert that Cyber Assistant is available.

http://www.irs.gov/charities/article/0,,id=212562,00.html

So get your 501c3 application (Form 1023) in before January 3rd to save $100. (The current fees are $300 or $750 depending on your gross revenues)

Cyber Assistant sounds like a good tool, but the IRS does not say when Cyber Assistant will be available in 2010, so we have no idea when the lower rate of $200 will be available.

Last time the IRS increased their fees they received a deluge of applications and had a huge backlog for months. Small, new nonprofits try to save a buck wherever they can and will try to take advantage of the lower rate.  While I am glad to see the fee will eventually be dropped to $200, I still expect to see an increase in applications before the due date.

Carol Topp, CPA


Lessons learned from a homeschool co-op

August 29, 2009

Faye, a homeschool mom and columnist for the DC Examiner.com, has a list of lessons she learned while being in two homeschool co-ops this year.

When we joined two homeschool co-ops last year, it completely changed our homeschooling life.  For one thing, I had to be sure not to plan anything else on co-op days, because we were already busy.  Sometimes this made scheduling field trips a little tricky, but the juggling was well worth the effort.  Another big change was that on co-op days, we all had to get up at a scheduled (earlier!) time, so that we could be out the door on time. We aren’t big morning people around here, but I think the change did us good.  And finally, it brought more friendship and support into our family and into our lives, which was perhaps the biggest blessing of all!  There were many other things that I learned, and I thought it would be fun to share a few of them:

1.  Kids who are not used to daily “school” may not always have pencils, pens, or paper.  Be sure to bring extra!

2.  No matter how hard you wish, if your co-op is exactly 18 minutes from your house, you will not be able to get there in 10 minutes.  Leave early (or at least on time).

3.  Even if you are the “teacher”, sometimes you will be late (refer to #2 for the solution to this problem)

4.  A big roll of paper and a box of crayons are indispensable for keeping little ones occupied.  The paper may come in handy for other uses (see #1).

5.  You probably already know this, but kids NEED time to run around outdoors.  If your co-op doesn’t have access to an outdoor space, try to find a way for the kids to take a walk or play some indoor games.  Getting the wiggles out is very important.

More of Fay’s lessons learned coming soon.

Meanwhile, if you would like to learn more about starting or running aHSCo-opsCover

homeschool co-op, order my book, Homeschool Co-ops: How to Start Them, Run Them and Not Burn Out.

Carol Topp, CPA


Is insurance needed for small homeschool groups?

August 25, 2009

Do small homeschool groups need insurance?

Often they do, especially of their host/landlord requires general liability insurance.

To help you discern your risk and need for insurance, Harvey Mechanic, an attorney that specializes in nonprofit law, lists some potential claim areas:

POTENTIAL CLAIM AREAS:

1. Discrimination (Age, Race, Sex)
2. Wrongful dismissal of employee
3. Mismanagement
4. Financial failure/bankruptcy
5. Poor administration resulting in losses
6. Causing the organization to incur unnecessary tax liability
7. Imprudent investments
8. Misuse of contributions
9. Conflict of interest
10. Unauthorized loans
11. Failure to obtain competitive bids
12. Unwarranted expansion
13. Failure to obtain government funding or lower interest loans
14. Misuse of government funds or grants

How many of these situations could occur in your homeschool organization? Probably some, but not all. Large nonprofits like the Red Cross or a hospital face many of these potential risks and need insurance.

In my article, “Insurance for Homeschool Groups,”  discuss the various types in insurance a homeschool group might need and how to lessen your risks to obtain a reasonably priced insurance policy.

Insurance for homeschool groups

Carol Topp, CPA


Should a co-op be a separate organization?

August 17, 2009

Carol,

We have one entity (group) that works outside of our association, this is our checkbook2Co-op group. This group does take in money – I believe it’s run out of a separate bank account. I know our Co-op group has a board, and bylaws but not an EIN number, which I know is very easy to get. What are they benefits of us staying as one group? My question is: should our Co-op group run their funds separately like this?

Sandy in TX

Sandy,

Your co-op could be organized as under your association or as a separate group. It’s really up to you. Since they have their own separate board and bylaws, perhaps they are really operating as a separate unincorporated association already. You could be officially separate if they obtain their own Employer Identification Number (EIN) from the IRS.

There might be advantages to staying as one group. There are fewer volunteers for the board positions, consolidated financial reports, and shared workload. The co-op could remain a part of your organization, but with a separate checking account and its own budget. It could be self-sustaining financially, but still part of your association. Many church-run schools operate like this, financially self-sufficient, but still under the umbrella of the church.

Carol Topp, CPA


Finding a CPA for your nonprofit

August 13, 2009

I wrote this article for Step by Step Fund Raising titled

A Good CPA is Hard to Find

by Carol Topp, CPA

Your nonprofit needs professional accounting help, but a good CPA can be hard to find. You desire someone who is knowledgeable but understandable, experienced but still affordable, and professional yet interested in your mission.

How to find a CPA to help your nonprofit:

  • Tell your staff, members and volunteers of your need and request that they ask friends and neighbors for referrals.
  • Mention your search for a CPA in your newsletter.
  • Look over your member or donor list for CPAs and  call to see if they are qualified and interested.
  • Join an on line professional network like LinedIn.com, join some groups and post your need.
  • Call your state CPA society for referrals. WebCPA.com lists state CPA societies at.
  • Ask other local nonprofits for their CPA’s contact information.
  • Use an on line matching service such as Accountants for the Public Interest that matches volunteer CPAs to nonprofits at.

Finding a qualified CPA is the just the beginning. You also desire a good working relationship that benefits your nonprofit more than it costs.

When you work with an accountant:

  • Be specific about the task
  • Ask for an estimate of their fee
  • Request an engagement letter that will spell out the specific tasks and estimated cost
  • Inquire if the charges can be reduced.  Some CPAs will offer a discount if you can delay work until after tax season.
  • Discuss how much of the work your staff or volunteers can do to help reduce fees.
  • Ask for lower cost alternatives. For example, a review of your financial statements may suffice instead of a full audit which is much more costly and time consuming.
  • Be prepared to ask questions, read and learn on your own

Seek out an accountant that has the ability advise you about the financial side of your nonprofit. You should feel comfortable with him or her and be free to ask questions. A good accountant is not just a bean counter; they are also a business advisor. They should explain issues and financial statements in a language that is accurate, yet understandable. If you leave a meeting with your accountant feeling confused, you should find another accountant.

Ask a potential CPA these questions:

  • How many nonprofits do you have as clients? Hopefully, the accountant has clients similar in size to your organization. Size is usually measured in staff size, number of clients served or annual revenue.
  • What is your area of specialty? Some CPAs conduct audits while others specialize in preparing the annual IRS Form 990. Select an accountant that matches your needs.
  • With whom will we be working? In medium and large accounting firms there are several layers of management.  The person doing the original interview may not the one doing the work.  Alternatively, in a small or solo firm you will probably work with only one individual.
  • May I see your biography or Curriculum Vitae  (CV)? Look for participation on church or community boards, published articles and professional memberships.
  • Can you explain to me the reporting requirements for my nonprofit? This type of question is really a test to see how well the CPA explains IRS guidelines.  Is their explanation understandable to you or do they lapse into accounting jargon?
  • Do you charge by the project or by the hour?
  • Am I free after this engagement to call you with questions?  Will I be billed for the phone call?

After their first audit, a small, but growing, nonprofit asked their CPA, “ How do we compare to other nonprofits? What can we be doing better?”  The CPA was unable to answer their questions.  He was good at number crunching, but he could not see the bigger picture and seemed unable to offer advice. The director was quite disappointed. They used the techniques mentioned here and found a qualified, helpful CPA with a reputable firm that guided them through many successful years of expansion.

Carol Topp, CPA //


Have we hit the $5,000 mark?

August 10, 2009

I am trying to do some research on the non-profit status for our Homeschool group and cannot find a clear answer. We are trying to see if we have hit the $5000 gross receipts limit.

Would money that individual members write to the group, so that the group can write one check to an organization, for instance a field trip, be considered in the gross receipts?

Nikki E

Nikki,
All money that comes in, even if it goes out almost right away like for a field trip, is considered gross income.

Not difficult to get over that $5,000 limit, is it?501c3_thumbnail.php

To help in your research you might want to read my e-book Tax Exempt 501c3 Status for Homeschool Organizations.

You can find it on my website www.HomeschoolCPA.com/Books.html

Best of success to you,

Carol Topp, CPA


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