September 2, 2009
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:
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.
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
April 21, 2009
Thanks so much for all your help in getting our Christian Homeschool Network up and running. Things are going well so far. My husband brought a card he saw at the post office and handed it to me thinking it might apply to our group. The same basic info is on this web site: http://www.irs.gov/charities/article/0,,id=169250,00.html
It is about a new filing requirement for small tax exempt organizations.Does this apply to us? I was unsure if this was just for 501 C 3 organizations.
The new IRS ePostcard (Form 990N) notification is for 501c3 organizations. The IRS is trying to clean up its database by using this short electronic postcard. They hope to find any “dead” nonprofits that are no longer in operation. They are also looking for small nonprofits that have “grown up” to the $25,000 gross revenues per year and should be filing a 990EZ or 990 Form annually. The ePostcard is a way for small nonprofits to acknowledge that they are still under the $25,000 annual revenue threshold for filing the 990.
Your organization has not yet applied for 501c3 status, so you do not have to file the ePostcard yet.
I recommend that you consider 501c3 status ASAP. The IRS expects nonprofits to file for 501c3 tax exempt status with in 27 months of formation (incorporation as a nonprofit). Your nonprofit incorporation date was May 27, 2008, so you have until August 2010 to apply. Otherwise, the IRS requests an explanation of why tax exempt status was not filed earlier and tax exemption is granted to the date of filing, not back to the date of formation. This could mean that a nonprofit might owe back income tax for the period that they were not tax exempt.
If your gross revenues stay under $5,000 a year, you are granted an exception from filing the paperwork for 501c3 status. If gross revenues get to be over $5,000 a year, your group should file for 501c3 tax exempt status or pay corporate income tax on any surplus (i.e. profit).
In a nutshell, a small nonprofit has three choices:
1. Stay under $5,000 gross revenues per year
2. File for 501c3 tax exempt status
3. Pay corporate income tax on any annual surplus.
I hope that helps,
Carol Topp, CPA
March 7, 2009
My homeschool group does several fund raisers where we divide the proceeds to each family to reduce the parents’ tuition. We have a shoppers reward program and I track how much of a tuition credit each parent earns by using their shoppers reward card. We also let students or parents work off some tuition by volunteering to work a shift at our city’s major league baseball stadium concessions. The team makes a donation to our homeschool group (a 501c3 organization). I’m having a hard time finding information on the IRS website about these types of fund raisers.
Susan in Ohio (paraphrase from a spoken conversation)
I’m sorry you found it so difficult to find information about fundraisers like your group is running. Sometimes you have to know the correct language to use in a search. Search on the words “Booster Club” to see what the IRS has said.
Here’s a wonderful link from a lawyer, Harvey Mechanic, that volunteers to answer nonprofit questions. He gets a lot of questions about booster clubs and fund raising like this one in particular: AllExperts NonProfit Law:Booster Clubs
To see all the questions and answers go here: AllExperts NonProfit Law
Mr Mechanic frequently refers readers to an IRS document titled Athletic Booster Clubs: Are They Exempt? He summarizes and edits the IRS document here: Summary of IRS Article on Booster Clubs
Here’s the full text at 14 pages: http://www.irs.gov/pub/irs-tege/eotopica93.pdf
I’ve read this document several times. It is a document that the IRS uses to train their employees. While it addresses athletic booster clubs, the principles apply to school booster clubs also, including homeschool groups that do fund raising.
Finally, Mr Mechanic answers a question about fund raising by working concessions at MLB games here: Working Concessions at MLB Games
I hope that helps. Sorry there’s not one paragraph at the IRS website to point you to! This is a collection of laws, rulings and cases over several years.
Carol Topp, CPA
February 19, 2009
Michele in Colorado e-mailed me with an excellent question on government intrusion into 501c3 organizations:
I am part of a homeschool group in Canon City, CO. We are trying to figure out what we are to do financially next year. We do not have a non -profit status and most people in our group do not want to organize that much. Some of the people in our group have had some experiences with 5013C status that the government has made them open their group up to individuals that they would not normally allow in their group because they are a government entity (like permitting someone not in our faith to teach a class).
Thank you so much for your help to the homeschool community and for whatever answers you can give us.
Good for you in wanting to make sure that you are doing things properly in your homeschool group.
Your people are mistaken. Receiving 501c3 tax exempt status does NOT make your organization a government entity; it simply means that you are exempt from paying income tax on your profit and donors can make tax-deductible contributions. It’s a tax status. 501c3 status does NOT mean you must open up your group. No way! We still have religious freedom in American and freedom to assemble. Someone is greatly misinformed. You are certainly free to choose your members and choose who teaches a class. Does a Catholic school have to allow non-Catholics teach their classes? Of course not!
The Boy Scouts won a very important Supreme Court case in 2000 allowing them to exclude homos*xual men from being Boy Scout leaders. Read about it here. Your group is free to exclude certain people from membership. It’s a basic American right called freedom of assembly.
God Bless America!
Carol Topp, CPA
February 13, 2009
Since tax season 2009 has officially launched, I’ll address a question I am frequently asked,
Do homeschoolers get any tax breaks for their homeschooling expenses? Can a homeschool family deduct any of their homeschool expenses?
The simple answer is “No; there are no tax credits for homeschool expenses from the federal government.”
The longer answer is “Maybe, depending on what state you live in.”
Several states have an educational tax credit. Iowa, Arizona, Minnesota and Illinois all have some sort of tax break for individuals. The credit is available to any public or private school student, so it is not unique to homeschoolers. Florida and Pennsylvania offer businesses tax credits if they sponsor a scholarship.
This document has a chart of education tax credits and deductions by state (updated November 2008). Scroll to page 6 to see the chart.
Home School Legal Defense Association has an explanation of some states’ tax breaks or credits:
Homeschoolers can get creative and think perhaps they can start a business or a nonprofit organization of their homeschool activities and then deduct their expenses. Ann Zeise of A to Z Home’s Cool addresses these ideas:
You cannot contribute to your own child’s K12 education and get any tax deduction for it, no more than if you sent him to a private school and tried to write off the tuition.
Carol Topp, CPA
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