Do you file/pay federal taxes?

Can any one share with me the pros and cons of being incorporated and having a tax id #? Our Treasurer wants to make a motion in the fall to hand over all of our funds to the school district. Right now we have our own interest bearing checking account without being incorporated or having a tax id #.

That means a new EIN.

Sounds like you are doing a great job! One suggestion - move "re-write bylaws" closer to the top of the list. You need to have them in shape to meet the incorporation rules in your state (probably minor) and the IRS requirements. (Not bad but they do require some specific language, including a dissolution clause.)

It would be better to re-write the bylaws as part of those two steps so everything works together.

Also, make sure the name you plan to use is available in your state (part of incorporation) so you don't put one thing on the EIN application only to discover you can't use that name when you incorporate.

By the way, does anyone know: when you incorporate, you have created a new legal entity. So does that mean a new EIN? Or do they let you keep the old one?

Here's an update to our group! The previous board had wisely decided to dissolve and re-organize the parent 'association' due to many factors---un-incorporation, no insurance, poor bylaws which had not been followed for several years, late filing taxes for last year, lawsuit filed related to a fundraiser of this group!!! The principal and school superintendent stepped in and halted the dissolution!! They then redirected the group to try to improve all the 'problems'. Well, last week 'our group' was successful in running for office for 2003/2004, and this new board will now continue the process started in April.

Thanks to the advice from Critter and may others on the PTO forums, our plan is now:
~join NPN~~done today, love all the resources on website!!! :&gt
~purchase insurance through NPN
~new board will (re-) vote to dissolve
~apply for new EIN number
~file incorporation with state
~apply for nonprofit with IRS
~rewrite bylaws
~after a 30 day notice (req with old bylaws) hold meeting 1st week of school for members to vote to switch to PTO
~hold first General Meeting in Sept. as NEW PTO

It is our hope that first this group will function better, AND that all the parents, teachers etc that went away disenfranchised with the 'old group' will now rejoin us in the fall and try out this 'new and improved' PTO!
Thanks! >(:: [img]smile.gif[/img] Ladybug01

Our PTO has existed for many years without being incorporated or non-profit. Recently, we applied for incorporation (through the state). In Michigan, that took one short form, $20, and 24 hours. No biggy, but each state's rules differ. I found what I needed through the state's website.

We are now in the process of completing Form 1023 for our 501(c)(3)federal tax-exempt status. This is a much more challenging application, to put it lightly, but not impossible. You do not change ein# (also called tax id #). As far as the IRS is concerned, however, when your group incorporates, you form a brand new group. Thus, we are completing the 1023 as though the PTO was just formed. So, instead of providing historical info, we have to project our budget for 3 years. If you've seen the application, this will make more sense. [In some cases, projecting might be easier than digging through incomplete historical files.] I have successfully completed this process for one PTO in our area, so I feel comfortable saying you don't need to hire professional help if you have a member who is willing to devote the time needed to complete the application. There's a fair amount of writing and number crunching, but there's a lot of help available here at this forum.

If you haven't heard this bit of advice before, heed the warning: incorporate in your state FIRST, then file for federal non-profit. If you file your 1023 first, and later decide to incorporate, you'll need to re-apply for 501(c)(3) which means another $500 application fee. The key benefit of incorporating is the protection it provides to your members and officers if the PTO is sued - your personal assets are protected and only the assets of the PTO itself are vulnerable.

On the question of tax returns: yes, once your PTO gets its 501(c)(3) designation, it is obligated to provide an "informational return" (Form 990) each year to the IRS. OK, if you earn less than the threshhold amount, you don't HAVE to file, but it's still good practice. It's not a difficult form, especially if you keep good records throughout the year. You don't pay any tax to the IRS.

If your PTO is ready to get these ducks in a row, you might want to consider joining PTOToday's NPN. You'll get a guide that will help your group through the whole non-profit process.