Let me clarify one point, if your PTO receives less than $5,000 gross income, the IRS doesn't expect you to formalize. But you are not automatically non-profit or tax exempt - you are simply small enough, the IRS doesn't care.

But if you make MORE than that, they expect you to formalizing your organization. Filing for 501(c)(3) status is a common and important step.

Critter is right, there is a lot of information on this forum to help you. The basic steps are (and, as an existing organization, you've probably already done some pieces):

• Request a new EIN and open a bank account with the EIN
  • Free, simple one page form (SS4). Can be done by mail, online, or by phone.
• Incorporate as a non-profit within your state
  • This makes you an entity and reduces personal liability of officers/board members. You want to do this if you can. In most states, it's some boilerplate paperwork and a small fee ($25-$50). But there are a few where it's more complicated. If it's more trouble than it's worth, skip it.
• Create or adapt robust bylaws and adopt them (that also satisfy IRS).
• File for 501(c)(3) status (after incorporating) with the IRS
  • This is a status federal that defines you as a charible organization.
  • Benefits: provides credibility, allows contributions to you to be deductable, and exempts you from paying federal income tax on your fundraising income.
  • Process: fairly complex application, plus $750 fee
• Apply for state sales tax exemption
  • state often requires you to have your 501(c)(3) first

Simultaneously, you'll continue with the program side of your organization.

The IRS Determination Letter is the letter that proves a group was granted 501c3 status by the IRS. You would have one only if your PTO successfully applied for tax-exempt (some say "non-profit") status using IRS Form 1023. You are not automatically tax exempt or non-profit unless your group makes less than $5,000 GROSS per year. When a group is a formal 501c3, the group is required to file IRS Form 990/990-EZ each year - it's like a tax return though there's no income tax due (hence "tax-exempt"). No, since every PTO is its own entity, there is no umbrella exemption.

No need to panic, however. There's lots of info about this subject here on this message board. Read up and come back with more questions.

By the way, who asked you about the Determination Letter? Most people don't know it by name.

I am a new PTO President at a local elementary school, and today was asked if we have an IRS Determination letter - do you have any idea what that is? Apparently we are supposed to have one and file tax returns each year???? When I was the treasurer 2 years ago, I asked about filing, and was told that we did not file because we are a non profit. As far as I know we have either never filed anything, or have not filed anything in a very very long time. I really need some help on this one. Is there an umbrella policy that PTO's all fall under similar to PTA's....... HELP!