:confused: We are a medium size school and only do 2 big fundraisers a year along with a fall festival and spring dance. My question is do we need a 501 c 3 we do bring in less then than $5000 per year, and how do you file for a tax expemtion we are in Texas. So are PTO's non profit and if so how do we file that also. I know thats is a lot of question but we what to do everything right and need alot of help and we are getting about 50 thousand different stories on what we are supposed to be doing.

Thank you ,
Andi

In Texas, you file for state sales tax exemption with the Office of the Comptroller of Public Accounts. You would have to check with them on what the eligibility rules are. Exemption FAQ.

I'll copy in some information below that should help you understand. This from a similar post I answered awhile back. Post again if you have more questions.

[FONT=Arial]There are helpful [/FONT][FONT=Arial]guides and tools [/FONT][FONT=Arial]for purchase via PTO Today. However there's also a lot of free help on these message boards. I know it will seem overwhelming at first, but what I'll list below is the "condensed" explanation of the different pieces. Start getting familiar with the terms and general concepts. Then come back to us with specific questions. [/FONT]

[FONT=Arial]================================================== =========[/FONT]

[FONT=Arial]The Business/Tax Side of Being a PTO[/FONT]

[FONT=Arial]While known for activities like supporting programs and volunteer recruitment, a PTO is a non-profit business. To run a PTO properly (legally) here are the steps:[/FONT]

[FONT=Arial]IRS Income Rule of Thumb[/FONT]
[FONT=Arial]If the PTO grosses more than $5,000 per year, it is supposed to formalize by applying for 501(3)(status). [/FONT]

[FONT=Arial]Example: PTO fundraisers bring in $8,000 with $3,500 expenses, leaving $4,500 for programs. The gross income amount is $8,000. They should file for 501(c)(3).[/FONT]


[FONT=Arial]Steps in Creating PTO (Filings, 501(c)(3), Exemptions)[/FONT]

[FONT=Arial]1. Obtain EIN from IRS. This Employer Identification Number (EIN) is your PTO’s 9-digit taxpayer identification number, similar to a person having a social security number (SSN). By itself, this has nothing to do with being tax exempt or non-profit. Nor do you necessarily have employees. [/FONT]

[FONT=Arial]Process: Simple IRS application completed as an easy interview-style online form, over the phone, or mailed as a 1 page SS4 form. Very simple. No cost. Note - even if form asks for SSNs of leaders, you do not need to furnish those.[/FONT]

[FONT=Arial]2. Develop bylaws for your organization. These are the rules by which the organization operates, and you want to create these with an eye towards meeting IRS requirements and state incorporation benefits.[/FONT]

[FONT=Arial]Process: Gather sample bylaws from organizations similar to yours that have good internal processes and already have 501(c)(3) status. Customize to meet your organization’s needs.[/FONT]

[FONT=Arial]3. Explore Incorporating as a Non-Profit in your state.In most states incorporating as a non-profit involves creating a simple Articles of Incorporation (AOI) for which they often have a short one-page template, filling out some minor paperwork, and paying a small fee (maybe $25-$50). In some states it may be more expensive/complicated and you need to weigh the value.[/FONT]

[FONT=Arial]Primary benefit is that it turns your organization into a single legal entity rather than collection of individuals - which reduces personal liability for the officers.[/FONT]

[FONT=Arial]Process: Find your state agency that governs this, review rules, submit paperwork and fee. [/FONT]

[FONT=Arial]4)[/FONT] [FONT=Arial]Apply to become a qualified 501(c)(3) organization with the IRS by filing form 1023. Benefits include:[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Increased credibility[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Donations to your organization are tax deductible[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Exempts your fundraising revenues from federal income tax[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]May be required for grant applications[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Probably required for sales tax exemption[/FONT]

[FONT=Arial]Process: Fill out application form 1023 and include $750 fee. This is a pretty intense form, but many of us have successfully filed it.[/FONT]

[FONT=Arial]5. Apply for sales tax exemption in your state.[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Exempts you from paying sales tax on qualified purchases for the PTO[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Exempts you from having to collect and remit sales tax on taxable items the PTO sells (t-shirts, fundraisers, concession stand, etc.).[/FONT]
[FONT=Wingdings]§ [/FONT][FONT=Arial]Note – this may not exempt your from everything. Rules vary by state.[/FONT]

[FONT=Arial]Process: Find your state agency that governs this, review rules, submit paperwork. Usually very simple and requires no fee. But you may have to be a 501(c)(3) first.[/FONT]

[FONT=Arial]Exempt Organizations - Help from the IRS [/FONT]

• [FONT=Arial]EO Web Site [/FONT]


• [FONT=Arial]EO Customer Account Services: [/FONT][FONT=Arial](877) 829-5500 (toll-free number).[/FONT]

Thank you so much "JHB" that really helps out alot. It makes more sence now. Thank you again

What happens if you have not 501C3 status and you want to start a PTO? How do you get a bank account? Under who's name? Do you have to get a dba?

Help! This is a brand new group for a brand new charter school who is not allowed to have a bank account of its own. The school has to deposit funds into the school district's account.

Thank you!

You need a tax ID number (EIN) for the bank account in the name of the PTO - if it's an independent entity. Don't use someone's social security number. See above (#1). Very easy. You don't have to be a 501(c)(3). Note - if the PTO is part of the school, more like a specialized committee, then the school might manage the funds rather than having a separate bank account.

Then you still do #2 (bylaws/set up your organization), maybe even check on #3 (incorporation).

From that point it depends on your size ($$). Generally, if you bring in more than $5000 per year, the IRS expects you to formalize and apply for 501(c)(3) status by filing the 1023 application form. The $5000 is everything coming into your accounts - not what's left over. If your gross receipts are less than than $5000 and you are following all the rules of a 501(c)(3) type organization you can exist by default as a tax-exempt entity in the eyes of the IRS.

Note - $5000 gross receipts test is actually a bit more complicated. See publication 557.

You should still have strong bylaws, good cash handling rules, fair voting - all those type things.

I'm not sure your correct on that point. My understanding of the new tax law that will apply for this tax year is that there will no longer be such a thing as "informal" status. You will either be taxable or tax exempt. Starting next year everyone will have to file a 990 no mater ho much money you bring in and also my understanding is that if any anytime your balance exceeds $5000.00 not an average. I could be mistaken but I have a friend who works for the IRS and one of our school board members works in the attorney general's office and they both said the same thing. Better safe than sorry.