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)

The Tax Prof Blog lists the top 100 churches in the US based on average weekly attendance.

Outreach Magazine is out with its annual list of the Top 100 Largest U.S. Churches.  Here are the Top 10:

1. Lakewood Church, Houston Texas – Joel Osteen (47,000)
2. Willow Creek Community Church, South Barrington, Ill. – Bill Hybels (23,500)
3. Second Baptist Church, Houston – Ed Young Sr. (23,198)
4. Saddleback Church, Lake Forest, Calif. – Rick Warren (22,000)
5. LifeChurch.tv, Edmond, Okla. – Craig Groeschel (19,907)
6. Southeast Christian Church, Louisville, Ky. – Dave Stone (18,013)
7. North Point Church, Alpharetta, Ga. – Andy Stanley (17,700)
8. Thomas Road Baptist Church, Lynchburg, Va. – Jonathan Falwell (17.445)
9. Calvary Chapel Fort Lauderdale, Fort Lauderdale, Fla. – Bob Coy (17,000)
10. The Potter's House, Dallas – T.D. Jakes (17,000)

The IRS has launched 5 new on-line training programs for small nonprofit organizations.  The topics include:

• Tax-Exempt Status – How can you keep your 501(c)(3) exempt?
• Unrelated Business Income – Does your organization generate taxable income?
• Employment Issues – How should you treat your workers for tax purposes?
• Form 990 – Would you like to file an error-free return?
• Required Disclosures – To whom do you have to show your records?

The IRS has a new form for small nonprofit organizations to file.  It's an electronic notification called an e-Postcard . I wrote about it here.  Now the IRS has some Q&A about the new filing requirements.

If you're a small nonprofit group (under $25,000 annual revenue) that has 501c3 tax exempt status, you should know about the ePostcard.  Be aware that sometime in your organization's past your group may have filed and received tax exempt status.  Your small organization may have been exempt from annual financial reporting to the IRS in the past, but you now must comply with the e-Postcard notification beginning in 2008.  Check the IRS database of charities to see if your organization has tax exempt status.

www.irs.gov/charities/article/0,,id=173864,00.html

Carol

I loaded two new ebooks on my website in early July and have received some nice feedback. 

Here's what Mary Nix of Home Education Magazine had to say on her Guide to Resources blog:

Carol Topp, CPA and homeschool Mom recently wrote to tell me that she is offering two FREE e-books at her website.

I’ve just finished reading these two books, Money Management for Homeschool Organizations and 501c3 Tax Exempt Status for Homeschool Groups and I would recommend them to anyone who is wondering what they should do about the financial aspect of their support group. Carol addresses these issues in layman’s terms that even I was able to understand and they really are free with no strings attached. Below are the descriptions that Carol sent along with the links to them. Thanks Carol, I know these will be a great help to many a group! ~~ Mary

HomeschoolCPA has been hearing about this new IRS reporting requirement for a while now.

If your organization gets a letter from the IRS, DO NOT ignore it. If you do not reply and file an electronic postcard as the IRS requests, your organization can lose its hard earned tax exempt status.

If you are unsure if your organization is tax exempt, go to the IRS website at www.irs.gov/eo and use the Search for Charities (left panel) to look up your group.  Use your official, legal name.

1.  Many Small Tax-Exempt Organizations Have New Information Reporting Requirement

My website host 1and1.com gives me neat statistics about what my website visitors are reading.  Here are the most popular articles and number of readers from January-July 2007 on my website www.HomeschoolCPA.com

Are You Ready for 501c3 Application?  221 readers viewed this article

How Do We Become a Recognized Nonprofit?  209 readers

Preparing a Budget (This does my accountant heart proud!) 202 readers

Hiring Paid Teachers 173 readers (A very important topic because of the employment tax issues)

Writing By Laws 141 readers

Do We Need 501c3? 134 readers

Insurance for Homeschool Groups 116 readers (added recently this year)

If you want to read any of these articles yourself, visit my website www.HomeschoolCPA.com and click on the Articles button or be sent directly by clicking here

I’ve been reading Jesus CEO by Laurie Beth Jones.  Using Ancient Wisdom for Visionary Leadership is the subtitle.  I’m taking highlights from her book and applying to our role as homeschool parents and leaders. P.S. Ms. Jones does not use the capital letter for the godly pronouns (Him, He, etc), so when I quote her, you will see the lack of capitalization.  It is her convention, not mine.

He Guarded His Energy

“He was so clear about his mission that he avoided many real and potential energy leaks…he never wasted energy begging or manipulating others to follow him.  In fact, he trained his staff to “wipe the dust from their feet.” …He also said not to “cast your pearls before swine” a very graphic image about the importance of knowing where and with whom to share the treasure of your energy.”

“What daily energy leaks keep you from being focused?”

• E-mail
• Late night TV shows
• Browsing through catalogs when I don't need another new outfit
• Complaining people
• A sense of inferiority ("I'm not doing enough")
• A sense of pride ("I have to do it all myself")

I’ve been reading Jesus CEO by Laurie Beth Jones.  Using Ancient Wisdom for Visionary Leadership is the subtitle.  I’m taking highlights from her book and applying to our role as homeschool parents and leaders. P.S. Ms. Jones does not use the capital letter for the godly pronouns (Him, He, etc), so when I quote her, you will see the lack of capitalization.  It is her convention, not mine.

He Stuck to His Mission

“Jesus knew his mission statement, and he did not deviate from it…In the wilderness Jesus was given several “business opportunities” that did not relate to his mission.  Each of these opportunities was related to talents that Jesus had, and used, in some form or another during his tenure.  But he resisted them because they did not fit his mission statement.”

“Can you list opportunities currently in your path that might really be distractions?  What are they?”

• Offer transcript and diploma services
• Hold a graduation ceremony
• Offer scholarships to a co-op program
• Hold a book sale
  
• Allow families to join who do not want to sign a statement of faith
• Allow families to join who use the public school's virtual charter school (i.e are still enrolled in the public school)
  
• Allow a grandparent to serve at co-op in place of the parent

I’ve been reading Jesus CEO by Laurie Beth Jones.  Using Ancient Wisdom for Visionary Leadership is the subtitle.  I’m taking highlights from her book and applying them to our role as homeschool parents and leaders. P.S. Ms. Jones does not use the capital letter for the godly pronouns (Him, He, etc), so when I quote her, you will see the lack of capitalization.  It is her convention, not mine.

Jesus Kept in Contact with His Boss

“He Kept in Constant Contact with His Boss…Jesus met with his boss daily; usually for hours…As a leaders, it is vitally important that you keep in touch with your boss on a regular, sacrosanct basis.  Chances are your boss can provide an aerial view that will make you path more clear.”

I knew it was coming.  The IRS now wants an annual reporting from ALL tax exempt (501c3) organizations-even the small ones.  It used to be if an organization's gross revenues were under $25,000 a year, they didn't have to report anything to the IRS.  Starting in 2008, the IRS wants an annual report from every organization.

 At least it looks pretty simple.  The IRS is asking for an electronic postcard with the following information:

• Organiation Name
• Address
• Website
• Director's name
• EIN (Employer Identification Number)
  
• Statement that the organization had less than $25,000 gross revenues.

Beginning in 2008, small tax-exempt organizations that previously were not required to file returns may be required to file an annual electronic notice, Form 990-N, Electronic Notice (e-Postcard) for Tax-Exempt Organizations not Required To File Form 990 or 990-EZ. This filing requirement applies to tax periods beginning after December 31, 2006.

The IRS will mail educational letters starting in July 2007 notifying small tax-exempt organizations that they may be required to file the e-Postcard.  The IRS is developing an electronic filing system (there will be no paper form) for the e-Postcard and will publicize filing procedures when the system is completed and ready for use.

 The IRS and many state attorney generals are reading the websites of nonprofit organizations.  Why?  What are they looking for?  According to Bruner-Cox Business Consultants and CPAs: