Here's the decision flow for a 501c3:

If your annual GROSS RECEIPTS are normally LESS than $25,000, then you do not need to fill out the Form 990/990-EZ. However, the IRS will send you a 990/990-EZ packet and you should check the box that indicates you do not need to file, and return the form so the IRS knows you have responded.

If your annual GROSS RECEIPTS are normally OVER $25,000, but LESS than $100,000, then you must file Form 990-EZ.

If your annual GROSS RECEIPTS are normally over $100,000, you must file Form 990.

The key words here are GROSS RECEIPTS and NORMALLY. Gross Receipts means total money into your PTO, regardless of your profit. You might be surprised how much money your PTO takes in. For example, if you have a fundraiser that earns 50% profit, and you clear $15,000, you actually took in $30,000. If your PTO handles book fair sales on behalf of your media center, you might take in another $12,000, even though the profit to the media center is only $3,000. You're up to $42,000 in GROSS RECEIPTS for those two activities alone.

NORMALLY means just that...your group usually experiences this level of gross receipts. If you had a big year with a one-time windfall from an auction or captial campaign, for example, you could possible fall below the NORMAL threshhold. However, it's probably a little unusual for a group to start a pattern of filing and then one year just stop. The IRS levies hefty fines for late 990/990-EZ forms so once your begin filing, be certain to do it every year. After the first year, the form is pretty easy to fill out by looking back at the prior year's forms.

As understand it, unless your annual gross receipts are greater than $25,000, you do not need to complete the 990 tax form. Is this correct?? Thanks!

Though many PTO's decide to incorporate before filing for their 501c3, it's not a federal requirement. Incorporation is a state status, 501c3 is a federal status. The fee for incorporating varies from state to state, but seems to be consistently low. In our state, we paid $20 initially and $20 per year to renew our incorporation. The form consists of basically name, address, and bylaws (Articles of Incorporation).

The primary benefit of incorporating is to provide a level of legal protection for the organization's officers. Also, the IRS views the incorporation date as the date your organization was founded, no matter how old your group really is. That can simplify the 501c3 application process considerably.

The federal id number is free and can be gotten by calling the IRS or visiting their website www.irs.gov. The form you need to fill out is called the SS-4. If you fill out the form first, then call, you can get the number over the phone.

There is a one-time fee ($150 or $500) to file for 501c3, but no annual renewal fee. As FM pointed out, the appication form (1023) and the annual "tax" return form (990/990-EZ) are a little daunting and some groups invest in professional assistance. But take heart, many PTOs have the expertise to complete the forms themselves -- you just may not know it yet.

Something else to keep in mind is that before you can become a 501(c)(3) organization, you will have to file for a Fed ID Number, and become incorporated (if you haven't done so already). This will require an investment on your part (legal/filing fees) assuming there isn't anyone in your organization possessing the skills to properly file all neccessary documents.

You might also have to retain the services of an accountant/lawyer that is able to file Form 990 on your behalf. Many times there are very capable individuals that can get the job done in your PTO organization. However, this is not always the case. Overall, just keep in mind that you will have costs associated with filing/preparing forms.

Once a registered 501c3, your group needs to report annually to the IRS using Form 990 or Form 990EZ. It's not an impossible task, but it does require a fair amount of on-going organizational discipline, record-keeping, and commitment. The IRS levies a stiff fine if the annual form is not completed on time. You need to look long-term and weigh the organization's maturity, culture, and infrastructure when evaluating if your group is ready to take on the responsibility of 501c3.

I don't believe our PTO is a 501 c3, and I think we should be. Can any of you who are let me know what you think the cons of this are, as I will be bringing this up soon to the board and want to be able back up my position and anticipate any arguments against it,as I am sure there will be some.

Thank you!