I agree with JHB - you don't really have much of a choice once your group starts making money. But there's something more to consider beyond just the initial 501c3 filing. Once your PTO is known to the IRS as a registered 501c3, you need to from now on, file the annual "tax return" document, Form 990 (or 990N or 990EZ). It's not a terribly difficult task, especially if your PTO stays under the $100,000 GROSS level (don't laugh, you'd be surprised how fast GROSS adds up) and you can avoid the long Form 990. BUT you need to keep really good financial records, no matter how much money your PTO makes. No more haphazard record-keeping. Every transaction must be recorded and catagorized. It's really not that hard, and any PTO Treasurer worth her salt should want to use proper controls and basic accounting standards. (Finance Manager does a great job).
When your PTO applies for 501c3, it's making a public declaration that it's a real professional organization. You've "grown up" so to speak. It's good from your donors and thus ultimately for your students. You just have to ensure that future officers understand the importance and implications of the 501c3 status. By the way, there's no actual tax due to the IRS; you just tell them where your money came from and where it went this year.
You'll also need to renew your incorporation (assuming your PTO incorporated in your state - a recommended but not required step in advance of 501c3 registration). There usually is a modest renewal fee, but it varies state to state.
Don't let this scare your PTO from doing the right thing. It's just part of formalizing your PTO for the betterment of your school.
Gaining a tax exemption is a privilege and requires strict rules be followed. For sales tax - which is what you are using the school's EIN for - everytime the number is used, the owner of the EIN must take responsibility that the purchase was eligible for the tax exemption and that the purchaser is an authorized agent of that organization. "Officially", schools will rarely let an outside entity use their number. It's too big a risk.
It's actually not a choice between getting your own EIN or becoming a 501(c)(3). Obtaining your EIN is the first step no matter what else you do. The "choice" starts with income levels. If your organization is separate from the school and brings in more than $5000 GROSS per year, the IRS expects your to formalize by applying for 501(c)(3) status. If you don't, you are just operating under their radar and hoping no one notices.
Note - while such organizations aren't really operating legally, the risk of getting "caught" is relatively low as the IRS isn't going on a big witch hunt trying to track down rogue parent groups.
Here's another thread that goes into the steps more deeply.
We have used the schools number in the past but are in the process of getting the 501c3 status now. It isn't that hard, just seems to be... so I would recommend the separate status, etc. You can do it!
Our elementary school's PTO does not have access to the school's tax ID number, so it inhibits many donations from companies and businesses. I have looked into a 501c3 number, but that means our PTO would need to become incorporated and that itself involves legal fees for processing.
Both options seem like so much work and all stuff over my head!
Any advice on which one to persue? Pros and cons? Do other schools go through all this or have you been able to use your school's number?
