Tackling Your PTO Tax Return

It’s a common misconception: Since our PTO is a nonprofit group, we don’t pay any taxes. Thus, we don’t have to file a tax return. Not true.

Your group must report annually on its finances and basic operations. This is true whether it is incorporated or not and whether or not it is officially certified by the IRS as nonprofit under section 501(c)(3) of the federal tax code.

The IRS collects this information by way of the “Return of Organization Exempt From Income Tax,” commonly called Form 990/990-EZ, and supplementary forms called Schedule A, Schedule G, and Schedule O. The forms let the public understand how much money your group handled this year and what you did with it. Anyone, PTO member or not, must be given a copy on written request. And your three most recent tax returns must be kept available for public inspection at your main office (the school office for most groups). If you step back and think about the implications of this disclosure for other types of nonprofit charities, you can see the value and importance of the information on the form.

The prospect of tackling a tax return might sound depressing. After all, few people instantly have a positive response to the IRS. But with a little preparation, you should be able to understand the IRS lingo and complete the form with confidence.

Some people simply call Form 990 a “tax return.” It does go to the IRS, but typically there are no taxes due. That said, there are exceptions to every common situation. So if your PTO has unique business or financial arrangements—you have paid employees, for example—you may need professional advice, and your situation is outside the scope of this article. But for the vast majority of parent groups, the form is fairly straightforward. You just need to take some time to match your financial data to the lines on the form.

Which Form To File

First, you need to determine whether your group must file Form 990 or Form 990-EZ. This distinction is based on annual gross receipts, not net profit. For example, your only fundraiser takes in $28,000 in sales and you pay the fundraising company 50 percent, or $14,000. Thus you made $14,000 on the fundraiser. Your gross receipts are $28,000 because that’s how much money your group handled, even though you kept only half.

Starting with the 2010 tax year, if your PTO’s annual gross receipts are normally $50,000 or less, then you could complete and electronically file Form 990-N through the IRS website instead. The IRS also calls this form the e-postcard. Like other versions of Form 990, the Form 990-N is due to the IRS by the 15th day of the fifth month following the end of your fiscal year. You will need the following information to complete Form 990-N:

• Your PTO’s tax identification number

• The tax year you are reporting

• The PTO’s legal name and mailing address

• Any other name(s) the PTO uses

• The name and address of a principal officer

• The PTO’s website address, if it has one

• Confirmation that the PTO’s annual gross receipts were less than or equal to $50,000

• If applicable, a statement that the PTO has disbanded (hope not!)

If your PTO grows above the $50,000 annual threshold, your group’s filing status will change and you will be required to fill out one of the other versions of Form 990. Be sure to calculate your gross receipts carefully. If your PTO acts as the banker for a booster club, student council, or the book fair, for example, the money handled counts toward gross receipts, even if it is not “owned” by the PTO.

On the high end, if your group is lucky enough to have annual gross receipts of $200,000 or more, you'll be required to complete Form 990 instead of the simpler Form 990-EZ. However, since the vast majority of PTOs are not in such a high income bracket, this article will focus on Form 990-EZ. So if your PTO’s annual gross receipts are typically more than $50,000 and less than $200,000, download a copy of Form 990-EZ and Schedules A, G, and O from www.irs.gov, grab your latest treasurer’s report, and let’s talk.

IRS Wants To Help

The IRS provides Form 990-EZ, Schedule A, Schedule G, and Schedule O, along with detailed instructions, on its website and by mail. The forms are only a few pages each and can be downloaded easily off the Internet. The instruction packets, however, run more than 20 pages each, so you might prefer to order those by phone at 877-829-5500. Allow about a week for the information to arrive by regular mail.

Telephone assistance for tax-exempt organizations is available at 877-829-5500. Although many people automatically assume calling the IRS will be a frustrating experience, I found every representative to be extremely helpful, and I rarely waited on hold more than three minutes. It is far better to wait a few minutes on the phone than to make an invalid assumption that may cause your form to be rejected.

The IRS also provides a fill-in form on its website that allows you to enter the data using your computer. This feature lets you to print out a very clean document, with all of the information typed. However, it will not do mathematical calculations, so it’s probably best to complete the form by hand first, then head to the website to prepare the final copy.

The IRS requests that you fill in every entry on the forms, using “0” or “N/A” for items that are not applicable to your group. Although the IRS allows you to round off your numbers to the whole dollar, it may be easier to cross-reference the form to your PTO’s financial files if you use the exact numbers, including both dollars and cents. And one final piece of advice from the IRS: Don’t forget to mark the box at the top of Form 990-EZ in area H, indicating you’re not required to file Schedule B (a list of contributors). Otherwise, your return will be kicked out and held until the IRS contacts you. This kind of delay could make your return miss the filing due date and possibly subject your group to penalties.

Form 990-EZ is due to the IRS by the 15th day of the fifth month after the end of your fiscal year. For example, if your fiscal year ends July 31, your form is due by Dec. 15 of the same year. Because of this delay, the form may have to be completed by a new treasurer, not the same person who presided over the financial activity being reported. If you are the current treasurer, do your successor a favor and get the data in order now so completing Form 990-EZ will be as easy as possible.

One idea is to cross-reference every account on your treasurer’s report to the associated line on the form. As you dive into the details of Form 990-EZ, you will see that it requires both gross and net amounts for income-producing activities. Be certain that your committee chairpeople and your financial transaction system track that level of detail or you will have difficulty completing the form accurately. It also might be a good idea to tell yourself that the form is due a month earlier than required so there’s a cushion in case you run into complications.

For a typical PTO, the complete return will consist of Form 990-EZ, Schedule A, Schedule G, and Schedule O. These attachments include details specific to your group’s activities for the year. Every attachment must include the form number, the tax year, your PTO’s name and tax identification number, and the applicable part/line number.

Organize the final packet in this order: Form 990-EZ, Schedule A, Schedule G, Schedule O, and then any additional attachments to Form 990-EZ that you may be required to include (for example, if your bylaws have been updated to reflect a name change for your organization). Before you mail it all off to the IRS, make a few copies for your files. Keep any spreadsheets or worksheets that you used to help calculate the numbers, and jot down any advice for the next preparer.

It’s a good idea to give the PTO president, secretary, and even your principal a copy so that next year’s treasurer can find at least one copy to use as a reference. And, of course, keep a copy in your treasurer’s archive. The IRS requires that supporting documentation be kept for at least three years.

If your PTO is not new, you will need to report the historical information as requested, even if you have not previously filed a return. Hopefully, the treasurer’s old files are complete and organized so you can gather the necessary details without frustration. Ideally, if your PTO has filed Form 990-EZ in the past, you can simply pull the numbers off the old forms. In either case, you will quickly realize the importance of good record-keeping for your sanity and that of future treasurers.

Note: The IRS publishes detailed instructions for Form 990/990-EZ, Schedule A, Schedule G, and Schedule O. Although every attempt at accuracy was made for this article, information and advice from the IRS supersedes any information presented here.

The Guts of Form 990-EZ

Part I: Revenue, Expenses, and Changes in Net Assets

Part I asks for the detailed financial numbers that support your PTO’s activity for the past fiscal year. Completing Part I will be straightforward if your PTO reports against a budget with individual categories for each major activity. You will need your year-end treasurer’s report to answer the questions. Ideally, this information is stored in a computerized format so you can sort, total, and verify the numbers easily. If your PTO does not use a budget or there is no comprehensive year-end report, you may need to analyze the checkbook entries for the entire fiscal year and classify every transaction according to the lines on the form. Form 990-EZ may be reason enough to adopt an annual budget.

Part II: Balance Sheets

You will need information as of the first and last days of your fiscal year to complete this section of the form. Basically, this section gives the reader an overview of the financial position of the PTO. In the simplest case, the only number reported here is the balance in the PTO’s checkbook.

Part III: Statement of Program Service Accomplishments

Part III of the form gives your PTO a chance to boast a little about your accomplishments for the year. In accordance with the directions, list your top three activities based on total expenses, including a brief description of the impact of each project. It is not necessary to write more than the space allows on lines 28-30. The IRS encourages you to be “clear, concise, and complete.”

Total the expenses for all other activities on Line 31, and include a simple list of those activities on Schedule O.

Part IV: List of Officers

In this section, the IRS asks for the names and addresses of your group’s officers. You can use the school’s address in lieu of the personal addresses. Be sure to enter the number of hours each officer devotes to the position each week. This number can be an estimate, but it must be a specific number. The IRS frowns on entries like “as much as necessary” or “at least four.”

Part V: Other Information

The typical PTO will answer “no” to the questions in this section. If you think one of these questions applies to your group, you may need professional advice to ensure that your return is accurate. This section also asks for the location of the PTO’s financial records, on Line 42a.

Part VI: Section 501(c)(3) Organizations Only

The typical PTO will answer “no” to all questions except Line 52 and write “N/A” or "None" where names are requested. Be sure to sign the form! The IRS will not accept an unsigned form. If your group paid a professional to complete the form, the preparer will also sign.

The Guts of Schedule A

Although Schedule A is four pages long, the typical PTO only completes a portion of the form. Enter the heading information on the first page. In Part I, check off box 10. Skip ahead to Part III on the third page and complete the Support Schedule. Enter a "0" or “not applicable” in the sections you skip to indicate you purposely ignored those questions.

Part IIIA asks for detailed numbers about your PTO’s annual income, which you figured out already for Form 990-EZ. In this section, the IRS is determining the percentage of public support for your group. The typical PTO will be 100 percent publicly supported.

Part IIIA also asks for data going back four additional years. If your group was established for the first time or was newly incorporated this year, then you have no prior history as far as the IRS is concerned. In that case, you will report data only for this year and can enter zeros in the prior years’ columns.

If your PTO is not new, you will need to report the historical information as requested, even if you have not previously filed a return. Hopefully the treasurer’s old files are complete and organized so you can gather the necessary details without frustration. Ideally, if your PTO has filed Form 990-EZ in the past, you can simply pull the numbers off the old forms. In either case, you quickly will realize the importance of good record-keeping for your sanity and that of future treasurers.

The Guts of Schedule G

Although Schedule G is three pages long, the typical PTO fills out only one section: Part II. Enter the heading information on the first page. If you are filing Form 990-EZ, you can skip Part I completely.

Part II asks for detailed information about your top two fundraisers in particular (columns a and b), and other large fundraisers in aggregate (column c). You must list revenue and expense information for each fundraiser.

Part III is all about gaming. If your PTO engages in gaming, you may want to seek professional advice since the rules of gaming are somewhat complicated and outside the scope of this article.

The Guts of Schedule O

Schedule O is used to report additional details about several sections and lines within Form 990-EZ. It replaces the free-form supplemental attachments previously included with Form 990-EZ. Enter the heading information at the top, and then report the details for the appropriate lines in Form 990-EZ as needed.

Originally posted in 2004 and updated regularly.