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Does the PTO need to file a tax return?

12 years 7 months ago #129185 by TAX ADVICE NEEDED PLEASE
Replied by TAX ADVICE NEEDED PLEASE on topic 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.
12 years 7 months ago #129203 by JHB
Short answer: yes, it's optional to file a 990/990EZ for 501s with normally less than $25,000 gross receipts.

Here are the basic numbers you hear discussed (but they are sort of two different areas).

$5,000 /unclassified. According to the IRS - A (non-profit) organization with normally more than $5000 gross receipts is expected to formalize its existance. Until then, it's not a 501 tax exempt organization, nor is it an individual. So that pretty much means it's considered a business and should file a business return. But you shouldn't just be doing nothing about reporting the income.

$25,000 / 501 tax exempt orgs. Once you are set up as a 501 tax exempt organization, then you follow the rules for 501's. There is a long list of exemptions for not having to file anything (e.g. are you a church, a governmental body?), but the primary criteria that affects PTOs - which are usually a 501(c)(3) - is that it must file a 990/990EZ if gross receipts normally exceed $25,000. Below that amount, it's voluntary. Note, many do file voluntarily to help maintain credibility, to keep in the bookkeeping habit. (And remember, it's just an informational return - more like filing a report. You don't typically pay anything.)

Here's the actual language:

If the [501] organization does not meet any of the exceptions listed in General Instruction B, and its annual gross receipts are normally more than $25,000, it must file Form 990 or Form 990-EZ.
12 years 7 months ago #129204 by JHB
Here is the IRS language on Gross Receipts:

$25,000 Gross Receipts Test
To determine if an organization's gross receipts are normally $25,000 or less, apply the following test. An organization's gross receipts normally are considered to be $25,000 or less if the organization is:
  1. Up to a year old and has received, or donors have pledged to give, $37,500 or less during its first tax year;
  2. Between 1 and 3 years old and averaged $30,000 or less in gross receipts during each of its first 2 tax years; or
  3. Three years old or more and averaged $25,000 or less in gross receipts for the immediately preceding 3 tax years (including the year in which the return would be filed).
$5,000 Gross Receipts Test
To determine if an organization's gross receipts are normally $5,000 or less, apply the following test. An organization's gross receipts normally are considered to be $5,000 or less if the organization is:
  1. Up to a year old and has received, or donors have pledged to give, $7,500 or less during its first tax year;
  2. Between 1 and 3 years old and averaged $6,000 or less in gross receipts during each of its first 2 tax years; or
  3. Three years old or more and averaged $5,000 or less in gross receipts for the immediately preceding 3 tax years (including the year in which the return would be filed).
12 years 7 months ago #129211 by RobinD
it is a VERY good idea to have a CPA be involved with preparing your 990 or 990EZ.. even if there ARE capable and knowledgeable board members. For 2 reasons- 1) it's a 3rd party, not involved in any way of handling the business of your PTO 2) It provides long term continuity.

We are just now clearing up a NIGHTMARE with the IRS.. we had one treasurer, once- back in 1995 file a 990... and never kept the records with our books... everyone after that never even knew taxes were supposed to be filed, or that we were on the radar.... then 5 years ago... ( yes, it took them 6 years to find us) we got a HUGE nastygram and a notice that we owed the IRS literally THOUSANDS in back fines.... it has taken 2 different PTO treasurers, a city accountant (who tossed it back at us because we are a 501(c)3 and not part of the school dept... and finally a great CPA to get the mess cleaned up...... we had to go back and file late for years 1996-2005. Of course, in the end, we owe nothing, but it has been very stressful.....
12 years 7 months ago #129224 by TAX ADVICE NEEDED PLEASE
Replied by TAX ADVICE NEEDED PLEASE on topic Does the PTO need to file a tax return?
Thanks so much for the help! This board is such a wonderful resource!
12 years 6 months ago #129923 by allys5
can someone answer this question we have a pre-school for disabled children on our campus. They are park of our district but not our school. Their students are not included in our enrollment numbers. There was a $75,000.00 donation to build their own playground on our campus. Last year our principal and PTO pres accepted the donation and deposited it in our PTO acct. we held the money for this pre-school and wrote the checks to the contractors. They are asking us to hold $3000.00 again this year and our board said NO. They sent an email stating that they needed the money to be deposited into a 501c3 organization. Is this legal? It sounds like they are trying to get out of paying taxes on the money. Their are NO minutes recorded for this decision. Help
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