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Does the PTO need to file a tax return?

17 years 3 months ago #129185 by TAX ADVICE NEEDED PLEASE
Replied by TAX ADVICE NEEDED PLEASE on topic RE: Does the PTO need to file a tax return?
We bring in income of over $5000 but under $25000. We are not yet a 501C3 but looking into it. JHB, are you saying (based on your post of 2/8/07), that once we become a 501C3, filing a 990/990EZ is optional until we have over $25,000 of income? I thought the 990EZ was required even for the under $25,000 501C3 groups. Thanks for helping to clarify this.
17 years 3 months ago #128935 by JHB
Our middle school PTO operates informally. When I became active, a re-organization was going on and I explained the IRS rules on this. They didn't really want to pursue the 501(c)(3). But nor do they want to run an questionable organization. They decided to keep income below the $5000 mark and that if they DID get involved in some project with more revenue to work it out where the funds went directly to the school (for whatever the agreed upon purpose).

So it's not that we can't take on a big project if something comes up. But we'd act more as a volunteer entity to run it and let the school be the fiduciary party.

For that particular group, which basically only does teacher appreciation, 8th grade prom, and some volunteer recruitment - I think it was a good choice.
17 years 3 months ago #128871 by volpeace
JHB - thanks for your post, it does give food for thought!
17 years 3 months ago #128797 by JHB
Being an unincorporated association doesn't make any difference with the IRS, nor does it give you any benefits or loopholes about reporting. It's the income level that drives it. If you bring in more than $5000 gross per year, the IRS rules say it should be reported. You are right, they don't know you exist. Many groups operate that way for years. And - frankly my opinion is that the risk of "getting caught" is pretty low. Unless there's another financial problem that puts you on their radar or you have someone report you, it's likely nothing will ever happen.

For myself, I fully understand a group's desire to keep things simple and proceed as is - basically the "ignorance is bliss" concept. But with my personal history and knowing as much as I do about the rules and requirements, I couldn't take a leadership role in such an organization. I wouldn't report them; but I couldn't be an officer. And, sad to say, it's not necessarily even my own ethics driving this (although I hope that plays a role). But if something DID happen and the IRS got involved, there's no way a organization could plead ignorance (if that could even be an argument) with me on board in a leadership role.
17 years 3 months ago #128793 by volpeace
How does the IRS view an unincorporated association? As a business? We've been operating for years and not filing a tax return but not receiving anything from the IRS either. I guess they don't know we exist. I'd just as soon not "stir the pot", but I'd want to be sure to be legal. I really would like to avoid the whole 501(c)3 route if we can and just be an unincorp. assn. We're a small public school in rural California so I'd like to keep things simple.
17 years 4 months ago #128278 by dlf
Thanks -- I believe we filed the 990 with the 501 paperwork submitted believing it to be the right thing to do. It wasn't until you mentioned on these boards how quickly we should have heard something that I started digging as to our 501 paperwork be completed. When I spoke with the IRS lo and behold it wasn't in yet. I'd left that effort to another board member and wasn't as researched on the issue until I needed to be. So we sent the last 501 packet return receipt certified so I KNOW it'll get there and then we'll be "legal" with the 990 after the end of our fiscal year. Thanks much as always J - you do own the island on this stuff (do you claim it :)).
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