First issue - is your PTO a separate entity from the school? One of the easiest indicators is that you have your own bank account and PTO officers/members control how that money is used.
If yes...
You need to understand that the PTO is essentially a business - hopefully a nonprofit business - but still a business. And nothing is tied to how much sits in your bank account. It's how much incoming revenue you have during the year.
The EIN (Employer Identification Number) is your organization's taxpayer ID. It's like a SSN, but for a business. To get one, you file a one page form with the IRS. It can be done by mail, online, or even over the phone. That's easy - no big deal at all. Note - the paper form asks for an officer/director's SSN. That info is optional, but I'm not sure if you can skip it if you apply online.
The basic rule of thumb is - does your organization bring in more than $5000 per year (total, not after expenses)? If yes, it's expected by the IRS that you would formalize and go through the steps to become a 501(c)(3). To do that requires a fairly complex application (Form 1023) and a $500 fee.
If you are under $5000, nobody really cares. But if you are making more and aren't a formal non-profit, then you are just a regular business and should be filing a commerical return.
But before you actually file to be a 501(c)(3), there are some parallel activities at the STATE level. Do you want to incorporate? (Lessens individual liability.) In most states it's a simple form and small fee ($25-$50). But you need to check the rules/fees for your state. If you DO want to incorporate as a non-profit, do this before filing for 501(c)(3) status with the IRS.
Also at the state level you want to see what it takes to get your organization exempt from SALES tax, and state income tax if you have that. (IRS is FEDERAL INCOME Tax). To be tax exempt in your state, you may have a simple form to file. You might have to be a 501(c)(3) first.
When you are a 501(c)(3) - THEN the $25,000 rule comes into play. If you have more than $25,000 gross income, you need to file an annual informational return with the IRS. If you make less, it's optional to file -but there are some good reasons to do so voluntarily.
Another concept you need to understand is your fiscal (business) year. While most individuals file taxes on a calendar year, PTOs would more likely have a fiscal year that runs June-May or July-June, something that coincides more with the school year. So all this is based on the income during your fiscal year.
My own feeling is that there's a very high percentage of PTOs, Band Clubs, Athletic Booster, and other school related organizations that SHOULD be formally organized and aren't. It's not right, it may actually be illegal, but it's a fact. I'm not suggesting that makes it okay - but you are hardly alone in this. And it's good you are asking these questions.
There's lots posted on this forum. Just type 501 as search term.
[ 11-09-2005, 08:36 PM: Message edited by: JHB ]
