In our case, our first step to getting our group formally organized was to incorporate in our state. To the IRS, the group is new as of its incorporation date. So, we moved forward with the 501c3 application from that point for our "new" PTO.
I don't know what would happen if your group were already incorporated some time in the past. The best bet is to plead your case to the IRS. My gut tells me they would rather help you take the steps forward to get 501c3 status, than chase you down for past non-compliance due to ignorance of the law.
Did you have to pay back taxes for the years where you thought you were exempt but later found out you werent or could you just continue business as usual?
I think many parent groups are in that situation, from reading these boards. They believe they are exempt but arent aware of all the details and rules and really arent exempt and are maybe afraid of the ramifications of doing all the paperwork and getting 'on board' the taxempt status.
First of all, public schools are automatically federally tax-exempt so donations directly to the school are chartitable contributions.
The easiest way to find out if your PTO is a separate entity (regardless of whether it's formally recognized by the IRS or not) or a part of the school is to go to the bank and find out what tax id number was used to set up the PTO's bank account. If the PTO is banking using the school's tax id number it is a branch of the school, whether or not you feel like you are. If the tax id number belongs to the PTO (and you might need to call the IRS to find that out if you can't figure it out from your files), then the PTO is set up as a separate entity.
Now, assuming the PTO is set up as a separate entity, that does not automatically mean you are a tax-exempt non-profit charity. As long as your PTO GROSSES over $5,000 a year, the IRS wants to know about you. Less than that (and that's GROSS,not net profit), and you can operate informally. Over $5k, and you should file for formal 501c3 status which requires submission of IRS Form 1023. With your 501c3, donations are federally tax-deductible.
Don't rely on someone's opinion about your PTO's status unless they really know the details. It's common for PTOers to assume their group is "non-profit" or "tax exempt" or "independent from the school" based on how they feel, without really knowing the underlying rules.
We assumed our PTO was "legal" for years until we got educated here on this site. Turned out our PTO's original bank account had been set up as a personal account using an old officer's ss#. Definately not the right way! Eventually, we got our own tax id# and applied for 501c3. Now we're on the up and up and a real independent tax-exempt charity.
I have no idea whether our PTO is nonprofit or a service branch of the school. I want to ask at our next meeting but want to be confident that I truly understand what I am asking for first.
If they are a service branch, does it mean the funds are all in one account with the school or would PTO still have it's own separate account? Can you call yourself non-profit if you haven't filed anything with the IRS? Also, in order for others to make donations to the school and be able to write it off, would the school need to apply for the tax-exempt status. Could they still write the donations off if they are a service branch?
