tax status of your coop

[MotherOfBoys]

Our small coop is wondering if we should be applying for 501c(3) nonprofit status. I did some research and I need to do some more. I found out about 501c(7) social group status. But I would like to hear if we need to do any of this.

 

They started the group 15 yrs ago. The group consists of 17 families with a max (registration day) $1,500 and quickly falls to $600 when receipts are turned in that week. The $500 of the $600 is a gift given 15 yrs ago to start the group. We are considering giving it back to the person (if we can find them) and closing the checking account. The bank told us we should close it because no one wants to put their social security number on the account and we don't have a business status. She also said there is never much money in it and we switch people often. We could go back to a cash box and hand written receipt way. A CPA suggested we get 501c(3) status but she doesn't know the little money we have and the plans to NOT grow. She always thinks big.

 

What does your coop do? Is there other government forms we should have filled out? I'm new to this coop but I'm becoming the financial person.

[SebastianCat]

I highly recommend Carol Topp's books.   Her website is www.homeschoolcpa.com.   Each of her books is available in ebook form for less than $5.   Her books and website will help you tremendously to answer the questions about your particular situation.

 

There is a threshold of income (I think it's $5000 per year) at which you must file an income tax return (although there would be no taxes due at that level of income - just filing the ePostcard).   Even if you take money into your account and it immediately goes back out to pay for things like building rental, website, insurance, etc., it's still considered "income."  If you intentionally stay small, you can avoid the government intervention, but you may have difficulty if you have no checking account of any kind.   

 

I was the treasurer of a startup homeschool group for 6 years, then stepped down and left the group at the beginning of this school year because my family's needs changed.   When we started, I was able to open a separate personal checking account, in my personal name, to handle the group finances, and it was helpful to have a debit card and to be able to use PayPal for fees.    I don't think that group could have gotten by without some sort of checking account.   By the time we got to about year 5, the group had grown to the point where our income was near or at $5000 per year, so we incorporated with our state, formed a board, wrote bylaws, etc., and got a business checking account.   

 

The downside to using someone's personal checking account is that the "income" coming into that account now looks like personal income to the government, and could become taxable to the individual.   It's also much easier for fraud to be committed if an account is only accessible by one single person.    However, most banks will not open a business checking account for a single individual - they want a formal nonprofit corporation, with bylaws, a board of directors, established officers, and multiple signers on the account.

[MotherOfBoys]

I found the website homeschoolcpa.com after I started this topic. It was very helpful. I showed it to the other person I'm working with and we agree on the plan ahead. The website said a personal checking account can look like a for-profit sole proprietorship if it was opened with a SSN and personal name. It said you are automatically assumed to be a nonprofit if under $5000 and have a board. Most become nonprofit to avoid paying taxes on their surplus but we spend everything at the end of the year.

 

Thank you. I started this when I was having no luck but shortly after I found what I wanted to know.

[Ellie]

I acquired a  DBA (Doing Business As) from the city where I lived, and a Employer Identification number from the IRS, and opened a checking account in the name of the business. When I was finished being in charge the activity, I passed it on to someone else--went to the bank, removed my name, added hers--and she did the same a few years later, and then that person did it again a few years after that. The organization was never incorporated (which is what you have to do to become a 501 ©(3)), and never filed a tax return in the 16 years of its existence.

[cintinative]

Our co-op is a 501 C3 and they did it so we could be tax-exempt.  So now we can do our own fundraising, etc. We are a bigger co-op also, about 40 families.

[Dmmetler]

We are a 501c7. I don't deal with money-we have a mom who Is a CPA and is married to a Tax attorney, and they handle it for us pro bono.

[SoCal_Bear]

We are incorporated as a 501©3...We have about 180 families currently. There is so much stuff going on all the time. I have things as automated as possible and gotten 98% of our payments to be via paypal. It helps that we use homeschool-life.com. They just upgraded their website features to have "accounting" features which does show each family's activity, payments and has invoicing features. It makes things so much easier now. It was so manual before I took over that I almost lost my marbles when I saw the 3 inch high stack of checks I had to process just for membership renewals and co-op facility fees.

[SoCal_Bear]

by the way, the threshold limit for the 990-EZ postcard return for a 501©3 is $50,000. 

[Hilltopmom]

Ours is cash box only. We collect a small per family annual fee that covers some supplies & our yearly donation to our meeting location.

Each week's teachers put out an envelope for their weekly class fee, if any.

 

This is our last year (myself & other leader are stepping down & no one else wants to take it over) & we will have a year end event (usually potluck, this year we may buy pizzas out of our cash) then donate the rest to our mtg location, which has let us meet there free for 3 years.

[mschickie]

Our co-op is part of a larger hs group that has around 150 families.  We do have tax exempt status but I am not sure if that is separate from the church that sponsors us.  It might have to do with the fact we are considered partly a ministry of the church.