HomeschoolCPA frequently gets asked what happens when a homeschool groups (support group, co-op, etc...) makes a profit.  The fear is that the group owes taxes, has to file paperwork with the IRS and may even have to hire an accountant to help them. 

It's a myth that nonprofits cannot make a profit. Nonprofits exist to complete a mission (education in the case of most homeschool groups), not to make a profit.  As long as your organization operates with nonprofit motive, it can make more money than it spends. So a nonprofit CAN make a profit. Whether or not a nonprofit's income is taxed depends on whether the activities are related to the nonprofit's purpose.

Nonprofits often make money from their activities and use it to pay their expenses. As long as a nonprofit's activities are associated with their purpose, any profit made from them is not taxed. The IRS WILL tax income from unrelated businesses (called the Unrelated Business Income Tax or UBIT)

Here's an example:  A nonprofit hospital's mission is to provide medical treatment.  It also runs a gift shop.  The gift shop is not related to the hospitals nonprofit mission, so the profit from the gift shop is taxable.

Homeschool organizations should watch out for income from unrelated activities such as:

• Fund raisers
• Selling tee shirts and other merchandise
• Selling advertising
• Income from affliate websites such as Amazon.com

• Volunteer Labor
• Selling donated merchandise
• Business operated for the convenience of members (like a school cafeteria)