Question: Tax exempt or not?

Just took over the president position and was told by Principal that the PTO can no longer use the school district's tax exempt number and that we should have our own. Then she asked how we have been paying taxes. I had no answer for her. What should I do? Also I don't even know if we are a registered non for profit organization.

Asked by lori14



Advice from PTO Today

Craig writes:
Lots of parent groups are in the same position -- it's great that you're taking steps to make sure your group is on the right track organizationally. There are three things you want to find out: whether your group is an independent organization, whether it's incorporated, and whether it's a registered tax-exempt charity. First, you're looking for an employer identification number (EIN), which is issued by the IRS. This is a like a social security number for businesses. Check with your bank to see what number the account was opened under -- it should either be your group's EIN or the school's. If it's the schools, then your group is not independent from the school -- you're actually functioning as a committee of the school. If you do have an EIN, check your records for incorporation papers, or check with your state's corporations department or secretary of state's office to see if your group is incorporated. Finally, if you are tax-exempt, you should have a "letter of determination" from the IRS indicating that you have applied for and received tax-exempt status (IRS form 1023). In that case, you should also have copies of IRS form 990-ez or 990-n (a postcard). These are the tax returns your group would file if it is tax-exempt. You don't owe taxes, but the IRS wants your financial information each year on these forms. If your group hasn't done any of these things, I'd strongly recommend our PTO Startup Toolkit, which walks you through the process of getting all of this in order. You can also find more information on these topics on our Bylaws/Nonprofit page. Good luck!

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