Thanks for coming back and updating us. It's a very valuable lesson for everyone. Great job!!

Update!!

Over a year later, we finally have a resolution!

After a little prodding, the other groups applied for their own tax ID and have quit using ours. I did offer to help them apply online and take care of it to hurry things along. I had given them a choice: they could give me all their financial info and I would include it with my monthly reports or they could get their own ID.

While I was sorting through all the old records, another letter from the IRS showed up asking about our 990 for the other years. I brought the info to the group and we decided to file all the past years together with a letter of explaination. We were assessed over $20,000 worth of penalties for late filings. The letter from the IRS had a section for removal of penalties with reasonable cause. I had to send in a few letters and make a few phone calls, but now, a year later, the IRS has removed all of our penalties! I must say it is a relief to finally have closure on this!

Thank you to everyone for their help especially JayVee and mom2m&a for their experiences in this problem.

Actually, I vote with the CPA. File for the past year and forget the rest. It's not like you are dodging paying taxes. The filing is an informational document. Why stir up trouble needlessly?

zaedeaux,

I think you got good advice above from folks who have beem there/done that. Don't panic, but be proactive and upfront. Take the steps to correct the situation.

Melissa C,

What do you mean you are not incorporated? Doesn't your group have a bank account? What EIN (Tax ID) is on the account? Unless the EIN is some individuals Social Security Number (in which case you - well the individual - have bigger problems to deal with) I think the IRS somehow knows your group exists in some form.

Since you are not 501c3, Critter is right about not filing Form 990 - I think you have to file a corporate tax return. The tax rate is 15% on income up to $50K.

My recommendation is the same - it will likely be much less painful if you make the first move to try and get it straightned out

Melissa - ademom is right, but in the meantime, you can probably relax a little. No, do not file a 990. At this point, the IRS doesn't even know your group exists. Technically, a group that handles $$ like most PTOs is either a registered non-profit, or a business. If you view your group as a business, you should be paying federal income tax. But like I said before, at this point, the IRS doesn't even know you exist. Now take some time to get educated, and consider your group's future.

Yes, with the kind of $$ you describe, your group should strongly consider incorporating and then filing for 501c3. But it's extremely unlikely the IRS is going to come calling on its own. The worst case scenario is when a group IS a 501c3 but they fail to file the annual 990/990EZ. THAT'S when you need to panic and act quickly to work with the IRS and hopefully get fines waived. But that's NOT your sitation. However, it does highlight one of the key aspects of getting 501c3 status--responsibility to the IRS. A group needs to have the organizational maturity to file the 990/990EZ EVERY YEAR once it earns 501c3. As Zaedeux is experiencing, the fines are very stiff for a lapse in filing.

That said, you should have a discussion with your fellow officers about formalizing your group. Is it the right thing for your group to do at this time? Once we learned that our PTO should be a 501c3 (due to the type of work we do, the $$ involved, the way we operate), we had a hard time ignoring the ethical obligation. But that's a decision for your group to make on its own.

There are tons of groups (not just PTOs) all other the place that are in the same situation as your group, mostly due to ignorance. The good news is that you have a little knowledge, a lot of resources, and the desire to do what's right.

Get yourselves in contact with a lawyer that specializes in non profit organizations in your state. It will cost you but it's worth the investment.

I live in NJ and we use a service called:The Center for Non-Profit Corporations, located in North Brunswick. They have been very helpful with negotiating the whole 501Ç3 process.

I would strongly urge all those with these kinds of questions to go to reliable source and not take what we say on these message boards as gospel. We all try to help each other but as Melissa says, the IRS is not a group to be trifled with.

Good luck and keep us posted.