I agree with the above poster about getting a CPA parent involved ASAP. When we took over this year we found out our Tax Exempt Certificate expired 5 years ago!!! Also that our PTO had NEVER filed any tax forms or other necessary forms with the state. We found an accountant to go back 4 years and fill out MA state taxes and Form PC. She did it as a donation but going forward she will be retained by the PTO at $200/year, but it will be money well spent. We did get our Tax Exemption Certificate back and our almost ready to file the rest. But it is very involved, we were very overwhelmed by it all, we have been working on this since July. The Form PC for MA also allows us to solicit funds from companies. We were doing it before and weren't even supposed to. Like others I know there are PTO's that don't file the correct paperwork but we want to have a Silent Auction so we needed to get all our paperwork in order. Our accountant has stated that gross receipts for us (we are in MA) does not mean everything we bring in. She took out our expenses, our gross receipts for last year were 33K but after she took out the expenses we were only 19k, close to the 25K mark. So we still only have to file with the State of MA and not the IRS yet.
But I would highly recommend getting a CPA involved. The forms were very complicated and justing trying to go back through 4 years of receipts, deposits and bank statements were more than we could/would want to do.
You must file 1023 if you do not meet the gross receipts test of not more than $5000 a year gross! There is a formula for computing this in Pubilcation 557. The 1023 is the application for non profit status.
You must file a 990 (or 990EZ) if your gross receipts are over $25,000 a year and you ARE a non profit organization (see above). Note if you qualify under the exception this test will not apply so you would not file a 990 at all nor anything else.
Otherwise you file an 1120, US Corporation Income Rax Return.
Super in answer to your question; If they are not a 501(c)(3) and they gross more than 5K a year they can not make the claim of being non profit and the "anything" value can not be deductable.
Mum, yes once you have filed always file, regardless of what the actual amount is. Unlike income taxes the IRS has no way of knowing if your organization had gross receipts over 25K or not once you have filed they assume you have. Remember the IRS is made up of people, people who are always looking for ways to get ahead and they get ahead by pulling in money (notice I did not say tax money). This is not to say they are really doing anything wrong either, generally organizations either do owe the fines, taxes or they merely forgot in this case and the letter is a way of getting their attention. It is not your organization they are really after here, but someone who made a claim of a donation.
And while I am on donatations, some donatations are reportable and some arent by you. Some things you may need to track individually and others you dont. Also, if at any time you recieve 10,000 or more at one shot (yea as if a PTO gets this) you have to file certain forms immediately.
I just want to add that if you are a 501(c)(3) you really do need to file the 990 every year, because if you don't it will catch up to you. Our PTO got a notice last year that it had not filed 990s for the previous three years. Big shock - we thought everything had been taken care of by the treasurers for those years. At one point our organization had a tax service that did it for us (we are a pretty large organization and are way over the limit for not filing) but apparently to save money they dropped the tax service. We are not sure what happened next - one of the past treasurers says he "lost" all the documents and another just didn't file the form because he didn't have the first two years forms (not filed) to go by. The letter from the IRS had huge amounts of penalties assessed to us (over $4000 for each year not filed). It was a mess but we finally got the forms filed and didn't have to pay the fines. You really need to take that tax-exempt status seriously.
We just went through all this with regard to the IRS, Sales Taxes and the like. Here's what we learned:
1. Every dollar the group receives is counted towards the IRS Top line Gross dollar limits, much like gross income on a 1040 personal tax return.
2. Although we do not pay income taxes as a nonprofit, we are responsible for payment of Ohio sales taxes on some of our activities for which a payment is received (some fundraisers, some of our activities). This varies state to state-(check with your state officials if necessary).
#2 above really cut into our projected profit from our fundraising, as it was unanticipated by the FR chairperson, who was told by the FR rep that we wouldn't have to pay sales tax; Turns out that we had to pay 7% sales Tax on the TOTAL sales (not just our profit) of the fundraiser, excepting the few food items that were sold. It clipped $1000 off our profit pretty fast.
NOTE: If there are any CPA parents in your school, ask them to volunteer to help clarify your tax issues - It really helped us!
RE: the gross income factor on determining filing requirements. I was told, (I've experienced a great deal of difficulty in finding a specific paragraph in the IRS code that delineates in laymans terms the determining factors) that if your gross is below $25K then you don't have to worry about tax liabilities. Additionally, I was told that if you work with a fundraising company as essentially the middleman (e.g. cookie dough or catalog sales) they factor taxes into the cost ahead of time and the PTO only need consider the "profit made" as their "GROSS" for that fundraiser. We've already done a catalog fundraiser that 'made' $20K, I don't have details so I don't know if the $20K was our take or total sales. Can anyone point me to the specific paragraph reference that clarifies these points? :confused:
I was embroiled in a 'discussion' about the tax filing procedures not used by the PTO I recently ( 2-years ago) joined. I was told that the treasurer was told that the PTO did not have to file any paperwork and the treasurer left it that without further researching the matter. I feel that this is very irresponsible, because if the organization is found out (by the IRS and state)later the penalties are no more excused by ignorance than for individual taxpayers or corporations and with the poor record keeping any investigation would be a headache :eek: if not a nightmare.
My question is this: if the PTO has not filed for 501C tax exempt status; :confused: then how can the PTO state on membership forms that membership contributions are tax exempt. I'm presuming that the intrinsic value of membership, which doesn't come with anything in return not even a pin, is $0.00. Our PTO membership forms for 2003-2004 had that statement on them, and even though most of the members probably don't itemize I think it's misrepresentation to place that statement on the form.
in a 'discussion' about the tax filing procedures not used by the PTO I recently ( 2-years ago) joined. I was told that the treasurer was told that the PTO did not have to file any paperwork and the treasurer left it that without further researching the matter. I feel that this is very irresponsible, because if the organization is found out (by the IRS and state)later the penalties are no more excused by ignorance than for individual taxpayers or corporations and with the poor record keeping any investigation would be a headache :eek: if not a nightmare.