One more thought...

One of the few good/interesting things about an informally run, badly documented PTO is that it's difficult for ANYONE to tell when or if it actually existed.

We faced exactly your situation and choose to start a NEW organization with a clean slate. New year, new bank account, new bylaws. So we filed without any history as there was no history for our "new" organization.

It may not affect your case, but I think we need a quick clarification here....

The IRS's rule of thumb for whether or not you should apply for 501(c)(3) status is if your organization grosses more than $5,000 per year. (Applying is a one-time process.)

The $25,000 number comes in to play after you are already a 501(c)(3). During the year, if you make more than $25K, you MUST file an annual income tax return (called a 990 or 990EZ). Otherwise, the annual filing is voluntary. That's a year by year decision and would equate to how individuals file an income tax (1040) each year, depending on income levels.

[ 04-21-2005, 04:29 PM: Message edited by: JHB ]

Thanks everyone! This all started when the school's business manager called me to say one or our accounts (still haven't figured out why we have more than one) was using the school's EIN #. We have an account for PTC (club), yum-yum, and the school store. Long story on some of this, I will spare you. So, we do have an EIN # and it was reactivated, so we do have an active EIN #. I also have the 1023 form, our president took it from me, she is a teacher and set up an appointment with the school's business manager to help fill this out, but she kept missing the appointments so I guess she filled it out on her own. By the way, the school's BM is the person who audit's our account every year. It looks like all the steps have been taken to "act" as tax exempt, but the IRS does not recognize us as one. Any past members that I speak with looks at me like I grew a 2nd head when I question them about this and I cannot find anything so far that shows if someone ever set us up. Nor are there any records as to when we were formed. The president is thinking 1999 because that is what paperwork they have, however, members from years ago says that we have been around since the 70's, maybe the 60's.

What I have come to thinking might have happened was this...because of what the IRS told me a couple of months ago. Someone at some time set us up as tax exempt, at that time, we were probably not grossing over $25,000, therefore they were not filling out the yearly form. I asked the IRS about this situation and stated if this is what happened, then how do you become not active if there are no forms to fill out yearly. He said that about every 3 yrs, the IRS will send out a letter asking if the group is still active and if they get no reply, they inactivate you. Apparently, this letter did not get into the right hands.

As far as I can tell, this PTC has been grossing over $25,000 for a few years. Mainly because the "school's", meaning our Primary, Intermediate, & Middle School run their fundraisers through us, we handle the money and pay the expenses and when the fundraiser is over, we write a "donation" check to the school. I surely hope this is a common practice, a local fundraising company told me all the schools do this. Therefore, we gross well over $25,000.

My biggest headache is to try and pull together from this "mess" I was given, 4 years of financial records and in a form that the IRS can understand (?).

Again, sorry so long...I think I answered Critter's questions...sort of.

Melissa

RH - don't panic. Your mess may not be as bad as it seems. The stereotype suggests that every encounter with the IRS will be horrible, but that has not been my experience at all.

First of all, take a deep breath and rest assured no one in dark sunglasses is going to come to your school to confiscate the PTO's assets. Do you know if your PTO is incorporated in your state? The "May" form may be a clue that you are, but can you prove it? If you are not incorporated, you will want to contact your state's commerce department (or similar entity) to get more info so your group can consider this first step. Typically, incorporation is a good idea, but let's find out if your PTO is already inc first.

Next, how much $$ (gross) does your PTO typically raise in a year? The IRS expects organizations like ours who raise more than $25,000 in a year to apply for 501c(c)(3) recognition. [ooops!...thanks JHB below for clarifying the threshhold is actually $5000] It's important to know that the IRS looks at GROSS income, not the amount of profit you have after you've paid the expenses. If your PTO is new or small, you might fall below the $5k threshold. Important to know this.

Does your PTO operate as an independent group from the school? Specifically, do you keep your money in bank account completely separate from the school? And does your group have its own bylaws and decision-making power separate from the school? If not, your PTO may be a committee of the school in which case you wouldn't apply for your own 501c3 since the school is automatically 501c3. But..you mentioned that your EIN is inactive, so that suggests your PTO is in fact a separate group. Question: if your EIN is inactive, what identification number was used to set up your PTO's bank account(s)? Hoepfully it's not someone's personal ss#, or the school's EIN. This is an important piece of info to find out from the bank.

Different from Rocket, I don't think it's time to hire an accountant. An accountant won't have any more luck digging through non-existent files than you have----and you'll be paying per hour for that service. Instead, start first with some reseach on the points above, plus you can search this website for more info on 501c3 and Form 1023. Check back issues of PTOToday magazine, too, if you have them. Plus there's the PTO Start Up Guide available here that would help, too. And you can call the IRS or access their website to order the application for non-profit status, Form 1023, plus its instruction packet. It's a little tough reading, but it's the authority on what you need to do to become 501c3.

[ 04-21-2005, 06:02 PM: Message edited by: Critter ]

Perhaps one of the parents in your group is an accountant? At the next meeting, make an announcement that you need advice from a CPA. Your principal may know which parents would be a good resource for this... we went through something like this with our group, and couldn't pay to get help, so we found a kid with a CPA mom.

I hope that your next call is to a local accountant in your town that can help you figure out the mess that your PTO is in. That's your safest bet. One year, the IRS misplaced our tax filing and sent us a bill for a $1,600 fine. Thank goodness that we had copies of everything and were able to supply them as proof of filing and did not have to pay the late fee.