Question: PTO lost 501c 3 status and now filing as Corporartion

We lost our non profit status with the IRS because of not filing the 990EZ form for 3 years. We've applied for retroactive reinstatement and are waiting to get it back. In the meantime I have to file a 1120 form as a corporation and pay taxes! Our receipts are only about $2000 and I'm looking for miscellaneous deductions that our PTO can legitimately take We give all of our reciepts back to the school in the form of funding fields trips, buying gym equipment, etc. Can I take these expenses as business expenses related to our business activity? This part of the 1120 tax return is confusing when we are essentially a non profit. Help!

Asked by lpardus

Answers:

Advice from PTO Today

Rose H writes:
Hi lpardus,

You shouldn't have to file as a corporation. You can restart the 501(c)(3) process. If your group has missed more three or more years, then it would need to refile the 1023 form to apply for 501(c)(3) status, along with the application fee. Plus, you would need to file missing annual returns using a form 990-EZ.

It sounds daunting, but it can be done!

We have a great article in our October issue of PTO Today Magazine that was also recently published online that will explain this process in more detail. Here's the link: Know Your Group's Legal Status

Good luck!
Rose C.

Advice from PTO Today

Craig writes:
To clarify, your situation is extremely unusual. The IRS has told us that they don't expect PTOs to pay back taxes -- just to file for reinstatement. I'm curious to know how you were notified by the IRS that you needed to file as a corporation. Was there a formal letter?

As far as accounting, you need to talk with an accountant who is experienced in nonprofit tax filing. You can also talk to the IRS directly, but I'd recommend that you get professional help. Good luck, and I'd really appreciate it if you'd keep us posted on how things go. We'll also be checking in with the IRS to see whether they've changed their approach to PTOs.

Community Advice

mum24kids writes:
All those things you mention are legitimate expenses, but it seems really odd that you would have to file an 1120 at this point. If you didn't get specific instructions from the IRS to do that, I wouldn't. Since you had 501(c)(3) status before, it seems highly likely you would get it again.

Community Advice

lpardus writes:
Here's some additional information on this matter: I did contact the IRS several times to check on the status of our form 1023 reinstatement application since it has been 6 months since I mailed it. Our PTO was concerned about our status and about missing another filing deadline so I asked the IRS what to do while we're waiting for a reinstatement decision and technically not a non profit entity. He told me we are obligated to file the 1120 corporate tax return, then amend it if we get 501(c)(3) status back. Other organizations need to be aware of this.