Question: Need advice, asap.

I am the new co -president of Middle school PTO. PTO is not incorporated or 501c3.Has been in existence for 8 years. I know we need an accountant asap, but I hope someone here can provide some insight. Outgoing PTO has been purchasing items for the school ( teacher wish list, supplies etc)from the school so they don't have to pay tax. This can't be legal. School orders items in their name and PTO pays school for it. Next- under what circumstances does a non 501c3 PTO file a tax return? We bring in about 25 k before expenses.I'm not sure one has been done. Financial records consist of a checkbook and bank statements. Doesn't that seem a bit lean? any insight would be greatly appreciated.I've gone to past officers and I get no infomation or mis- information. Thanks.

Asked by oliver



Advice from PTO Today

Craig writes:
Hi Oliver -- Those are good questions, and you're not alone. Lots of parent groups are operating in a kind of in between world where they act like nonprofits but they haven't filed the paperwork to become officially tax-exempt. The good news is that in our experience the IRS's goal is to make groups like yours legal rather than to come down on them for how they operated in the past. On the other hand, the IRS seems to have stepped up its efforts to make groups comply. Now that you're aware of the situation, you should move your group ahead toward getting 501c3 status. Regarding taxes, 501c3 groups file a tax information return. You don't have to pay anything, but you do have to report your earnings, etc. to the IRS. The filing date is based on your incorporation date or fiscal year. If your group isn't 501c3, you're technically not tax-exempt and the IRS's position is that you should be filing business income taxes. As I said, lots of groups are in the same position you are -- they aren't officially tax-exempt and they haven't paid taxes. And that system of reimbursing the school that your group has been using doesn't change the situation. Regarding financial records, you absolutely should be saving receipts so you can audit your books at the end of the year. You should also be saving canceled checks and check registers, and your monthly treasurer reports. Here's a link to a piece on the file exchanged called PTO Record-Retention Rules. You should also check out the article 5 Smart Financial Controls. At the bottom of this page is a list of topic links. You might check out the Bylaws/Nonprofit and Treasurer topic pages. They both have lots of helpful information. Finally, we offer for sale two very detailed toolkits that might help: the PTO Startup Toolkitwalks you through the process of incorporating and getting a 501c3. It includes line-by-line instructions for filling out form 1024, the application for IRS tax-exemption. The Treasurer's Toolkit has detailed instructions and all of the forms you need to do the treasurer's job well. Good luck. This may seem like a lot, but it's not that complicated. It's just a matter of putting a good system into place.

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