Wow, I can tell we have alot to learn!! I suppose that if we do make a mistake with our tax information it isn't a big deal to rectify, espically if we don't have a great deal of money.

I think an investment of a book or software would be a wonderful thing. Thanks so much to all of you for replying, I am learning alot! [img]smile.gif[/img]

1ptomom

Twokids - if your PTO applied for 501c3, it has its own tax id number. So I wonder why you don't have your own bank account? Is that what your mean by branching off the school's? Anyway, don't fret about making money - that's what you're supposed to do.

If you are a 501c3, you are exempt from paying federal income tax. You do, however, have to file the annual Form 990EZ, but you don't pay taxes. The IRS will automatically mail the annual 990 packet to the address they have on file for your group, well in advance of the due date.

bobwhite-if your PTO is a 501c3, the only document that I am certain you are legally obligated to provide for public inspection is your annual Form990EZ. (I'm not sure if your initial application for 501c3, Form 1023, is open to public inspection). Form 990EZ basically discloses where your money came from for the year, and where it went. But let's go back to your real question...

Why does your principal want to see all that detail? That's alot of paperwork for a principal to dig through. Is s/he getting pressure from the admin to find out just how financially secure the PTO is? What questions is s/he trying to answer? If you are concerned there's more than idle curiousity here, I would offer to set up a time when the Prez, Trez, and Princ can sit together and review the information to help satisfy the principal's needs. Taken out of context, financial information might raise more questions than it answers. By having your officers working side by side, the principal's time will be used most efficiently. That may not be what s/he has in mind, but it's a fair offer.

As far as legality goes, I don't know what you're obligated to disclose to an ex officio member. Hopefully the relationship between your principal and your PTO doesn't teeter on legal issues.

To Critter: Does the principal at your school have the right to demand to see all of your books that you keep account with and all of the bank statements? Our middle school principal is demanding to see all of these and she's not on the PTO's bank account; she's just listed as the 'ex-officio' which means her school is just the sponsor sight for the PTO. I am awaiting to hear from the two gals that are on the board with me to decide what we officially want to do in this respect and hope to meet Tuesday evening.
I await your response.

Hi, new PTO here also. First of all, when we filed for the 501(c) we did not have a bank account yet. Second, when we did go to the bank with money we sorta branched off the schools account (nothing was said about the by-laws, we didnt even have them yet). All of our fees are to be waived for us. However, because we were new we had to order checks. With a business checking account we got desk set checks, they cost more than what we had in the bank! Then we did our first fundraiser and got more money...
As for taxes, gosh I didnt know we had to file any???

Your best bet is to spend some time reading through this forum. There's a ton of advice and information on this in the old posts, and articles in the magazine archive. You should also consider ordering the PTOToday Start Up Guide which answers start-up questions in one binder.

It sounds like your PTO is very small (at least for now). You probably don't need to formalize as a federally-registered tax-exempt 501c3 charity (that sounds scary, but it's what many mature PTOs have done). The IRS doesn't expect registration until a non-profit group consistently grosses over $5000 per year. For the time being, until your group grows in financial size and organizational experience, you could start out very simply.

You are right. The first step is to get a tax identification number from the IRS. Free, fast. Do not use anyone's social security number, and do not use the school's tax id number. Get your own. With that number, your group can now open a small business checking account. Grace said you'd need bylaws to open your account, but that has not been my experience. If you haven't already set up an account, shop for a small business checking account with very low or no fees that is located convenient to your school. While it's sometimes nice to be able to view your bank activity on line or have an ATM card, I wouldn't select a bank soley on those features. It's far more important to avoid paying fees for the privilege of depositing large amounts of cash, or a fee for low account balance, for example. Read the fine print and ask the bank clerk specific questions. Banking is very competitive - you won't see the same offerings at every bank.

Assign at least 3 authorized signers to the account (PTO officers) and order your checks with two signature lines. Use the school's address, but your PTO's name.

Grace mentioned a VERY common misconception about non-profit organizations. There is no federal limit on the amount of profit an organziation can earn, nor must a group spend down all its profit each year. A federally-recognized tax-exempt c501c3 harity does not pay income tax, no matter how much money they have in the bank. Yes, a 501c3 group does have to file an annual "tax return" called Form 990EZ, but there are no actual taxes due. You can legally earn, bank, and save profit from year to year, without penalty.

Being 501c3 has its benefits (allows your donors to write off their donations, formalizes your group, qualifies you to participate in certain programs such as grants, exempts your group from federal income tax and possibly state sales tax), but it also comes with responsibilities (good record-keeping, annual tax return filing). It's not appropriate for every PTO, especially a new small one like yours.

I'm not an attorney and I don't work for the IRS, but if I were an officer in your group, I would open our checking account, do our good work, and visit PTOToday often to deepen my understanding of these issues...so that in the future if we grow to the point of registering as a 501c3, we have a foundation of knowledge to draw upon.

You're doing the right thing already - you're asking for advice. Relax, you're on the right track and your students are lucky to have you!