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PTO never paid taxes, not incorporated

7 years 3 weeks ago #171850 by lharac
Hi, m295763 -- it's great that you're thinking about these issues! You can take a deep breath, though -- the situation is not as dire as it seems.

First, we've found over the years that the IRS is not looking to "go after" small parent groups who weren't following the letter of the law. Instead, they want to see that you're turning your attention to doing things right from this point forward.

The most straightforward course of action is to incorporate in your state as a nonprofit, then file with the IRS for 501(c)(3) tax-exempt status. The very act of incorporating creates a brand-new organization in the eyes of the IRS -- one with no financial history at all. In this way you'll be starting with a clean slate, and the past four years will not be an issue. The fact that you have a bank account and bylaws already puts you ahead of the game from an organizational standpoint.

You *do not* need to hire an attorney or a CPA -- many, many parent groups have successfully filed for tax-exempt status without doing so. You can choose to consult with one, of course! But it's not a must-do.

Here's an article that lays out the process step by step -- it also has some links at the end to additional resources, including our Startup Toolkit which has line-by-line instructions for completing the IRS tax-exemption application (Form 1023).
Tax-Exemption and Nonprofit Status: What PTOs Should Know

Good luck, and let us know how it goes!

Lani @ PTO Today
7 years 4 weeks ago #171849 by m295763
I was just elected to be the treasurer of our PTO and while reviewing the materials I inherited from the previous treasurer, I found out some problems. The PTO started in the fall of 2013, which happens to be the same time as when the school opened. I knew that our PTO was not 501(c)(3) organization, and this has been on the previous officers to-do list for the last 4 years but never done. The 2017-2018 board are all new but one (our bylaw limits any member to serve on the board for more than 4 years), and it was our number one goal to attain the tax exempt status.

As I went through the record, however, I realized that the PTO never paid income taxes to either IRS or the state. Here are the facts:
1. We have EIN Number (though not the original communication from the IRS listing our EIN - previous treasurer wrote it on a sticky note for me)
2. We have a bank account as the PTO.
3. We have bylaws, and have been organized and functioning as PTO for the last 4 years.
4. Our annual revenues have been over $5,000 every school year for the last 4 years.
5. State of CT does not have a record of us (not incorporated/registered).
6. Definitely never filed Form 1023 to receive tax exempt status

I'd think we would have to file for income taxes for 2013-2016 for both IRS and State Revenue Service, pay the delinquent taxes with penalty, but I'm a bit overwhelmed to know where to start. Do we try and register as a corporation (non profit) with the state first, and then file taxes? File taxes first and then register with the state? And when do we apply for 501(c)(3) approval? I heard somewhere that if we incorporate as a NON-Non-Profit (I hope that makes sense) first, then we can't obtain 501(c)(3) later even if we change our status as non-profit with the state - is that true?

And I'm sure we'll need attorney and CPA to give us professional guidance, but where do I even start to look for one that knows these things?

Thank you for your help,
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