If you file as a small (for-profit) business, then I would assume the same $20/day fee applies to small businesses that file late, in addition to owing back taxes, possibly with penalties. Maybe you could get a small-business accountant to meet with the board and convince them that this isn't a good approach.

I wouldn't worry so much about legally protecting yourself; it's not like the IRS is going to single you out, among all the officers past and current, to sue for not filing taxes.

That's exactly what the IRS told me and I'm not scared of the possible $20/day fee. I think we should do exactly what the IRS and you are suggesting. However, there is a STRONG resistance to me, and the few board members that are left, to continue on with this.

While I don't want to dissolve and do still want a PTO, it is becoming obvious to me that "Small Town Politics" really does exist and honestly, I'm afraid of the damage that could be done by pressing forward.

At this point, I just want to make sure that as a current board member, I make sure that we file whatever paperwork needs to be filed. If we aren't a 501c3, then I'm assuming we are considered a small business?? If filing the appropriate paperwork for this year stirs up anything then so be it but I'm doing what I need to do legally to protect myself.

I know it's possible she took more money, and we could try to press charges etc. My argument to the board since this occured was that we need to get our affairs in order to help guard against this in the first place. It's kind of like this...If your car gets stolen from the airport and when the cops are investigating you tell them that you can't believe this happened to you! This is the second time your car has been stolen and both times you left the car unlocked, with the keys in the ignition, while out of town for months. It doesn't change the fact that someone stole your car, but if you don't want it stolen, atleast do what you can to protect it.

The problem is that even though this has happened (and apparently it's not the first time this PTO has experienced embezzlement) a number of people don't see why we are trying to make these changes. How do you help someone who doesn't want to help themself?

AngelaLT;141963 wrote: We are a small PTO at a small school. Our average gross income is about $20,000 - $25,000. Our bank account is set up as a non profit account under an EIN number that according to the IRS is no longer active. The IRS suggested that we try to get our old number reinstated, file for 501c3 status,
and then file 990's for the past 3 years. If we obtain 501c3 status, then we wouldn't be responsible for back taxes, but we could be subject to a $20 a day late filing fee.

Our PTO had never filed 501c3 nor 990-EZ in 20 years, and our EIN was similarly "inactive." The IRS agent I talked to said that we should, indeed, file past years, and said though there is a $20/day fee, I would be able to file a letter requesting abatement. So, don't let the fee scare you off. (I've filed for 501c3, but I'm still working on the 990s, so I can't say how this actually will turn out.)

I don't think you really want to dissolve, because surely you still want a PTO, and the new org would still be required to file with the IRS. With the existing org, you have financial records that you should be able to use to prove you are eligible for 501c3.

AngelaLT;141963 wrote: She resigned and paid the money back.

I'd bet bucks that she didn't pay all the money back. Folks who wind up stealing from nonprofits usually have a reason why they steal -- they don't usually have a lot of excess cash hanging around to pay back their victims.

Often a big difference -- this comes out when the professionals investigate -- between what someone says she stole and what was actually stolen.

I know it doesn't answer your question -- but a thought for you guys.

Tim

1. Contact your local D.A. to see if you have any recourse against her.

2. Contact the IRS and help them to understand what has been going on. The Tax Id # may have lapsed because the paperwork was never filed. There are other organizations on the web to help with filing the 501(c)3 paper work and could offer some advice.

3. Establish a clear set of paperwork that needs to be filed each year by the treasurer and conduct regular audits at the end of each fiscal year. (These can be as simple or complex as you like.)

Here is the IRS pamphlet on Tax Exempt Status: www.irs.gov/pub/irs-pdf/p4220.pdf