Some homeschool groups are very small and are not interested in the benefits of tax exemption such as accepting donations or doing fundraising.
Do these small homeschool groups really need 501c3 tax exempt status?
No. They don’t.
They can run their activities without the benefits of 501c3 tax exempt status.
But then how does the IRS or their state view this group? Will they owe taxes on any surplus? Yes, they will owe tax because they do not have tax exempt status. If they have a surplus, how do they go about filing a tax return and paying taxes?
There are a few possibilities. The IRS could view these homeschool groups as:
- A 501(c )(7) social club with self-declared tax exempt status
- An educational organization that could be so small* they can self-declare tax exempt status (or should apply for 501c3 status) and be filing an annual information return, most likely the 990-N ePostcard
- A gathering of friends simply pooling money for a group activity. But then they probably need to operate in cash (or Venmo payments) without a checking account, official name, EIN, etc.
- A business who should be paying taxes!
*under $5,000 of annual gross revenues
Can you guess which one the IRS prefers? Yep, it’s the last one! That means your homeschool group who hasn’t applied for tax exempt status should be paying taxes!
Listen to Carol Topp as she explains these options.
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Featured Resource
In the podcast I mentioned my book:
The IRS and Your Homeschool Organization
Should your homeschool group be paying 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
Any updates to this with the recent tax law change of $600?
Cate, Beginning in 2022 third party payment systems like Paypal and Venmo will send a 1099-K to anyone using their systems that received more than $600/year. I wrote a blog post about how this new reporting requirement may affect homeschool groups using PayPal, Venmo or Stripe, Square, etc. https://homeschoolcpa.com/homeschool-groups-prepare-for-new-1099-k-reports-if-you-use-paypal-stripe-venmo-etc/