JHB,
Thanks for the info. I am new to this and am not to sure what we need. When signing the papers for the yearbook she asked if we were tax emempt and showed me a W-9 form, and that is an IRS form so I guess I will contact the state and see what we need for the state.
You might have to clarify your question as there are federal and state taxes.
Essentially, if your group makes more than $5000 income per yer (Gross, not net), you should be setup and filing with the IRS. Your PTO is, in fact, a type of business. Ideally, it's a non-profit business.
At the federal level, you apply for an Employer Identification Number (EIN), which is the organizational equivelent of a SSN. No fee. One form. Very simply. You can even do it over the phone.
To get recognized as a tax exempt non-profit by the IRS, you file an application that's somewhat complex and has a $500 filing fee. This designation is called a 501(c)(3).
The state level activities, which are separate, might include:
1) Incorporating as a non-profit coporation (which needs to happen before you file for 501(c)(3) status with the IRS) is one step you might want to consider. Usually, it's a fairly simple set of forms and a low fee ($25-$50). One of the benefits is that it reduces the personal liability of your officers and board. But you need to check your state's laws. In some places it is a more complicated process.
2) Exemption from local/state sales tax is what most PTOs seek. You might need to be a 501(c)(3) first, but it depends on the rules in your state. Being exempt might free your PTO from paying sales tax on its purchases AND from collecting/remitting sales tax on all or part of it's taxable activities.
I belong to two PTOs. The elementary one is more formal and is a 501(c)(3). It files the appropriate documents with the IRS - which are informational, no taxes are due. We are tax exempt in Texas which saves us taxes on two fundraisers per year. But we do pay sales tax on other things. It's just keeping track of the taxable sales and submitting the amount with a form once a year. No big deal at all.
My other PTO makes less than $5000 and operates informally. We don't run any taxable activities, so we don't pay taxes.
I just found out that the state tax exempt number that I have been using for the past two years is no longer valid. :eek: Apparently in Indiana, you have to file a return every year or you lose your tax exempt status.
All I had to do get a new tax number was fill out an application for sales tax exemption. If you go to your state's website and look under non-profit, you should be able to get a form.
