Sorry I wasn't clear. I was talking about the whole cycle starting with the 501(c)(3).
Once receiving the 501 designation, a typical PTO wouldn't pay yearly taxes. The return they file is an informational one. My point was that the initial IRS fee wasn't just the beginning of endless payments to the IRS.
If an PTO never goes through the process of formalizing and becoming a 501(c)(3), then it's just a business and should be filing a business return. (Says the IRS.) Of course, we all know that what most informally operating PTOs do is "nothing". They simply operate off-radar.
If you are NOT 501c3, I believe your PTO needs to submit tax form (and pay what is due) every year.
If you pay the $750 application fee and are an approved 501c3, then you do not pay taxes but you do owe a financial statement form to the IRS instead (Form 990).
I am not sure that "a typical PTO wouldn't pay federal income tax" is a correct statement, UNLESS they are 501c3.
Oops! You're right. That's what I get for working with 3 different groups in 3 totally different stages & all that paperwork - and then doing a quick reply instead of thinking about what I'm saying.
I'm also the treasurer for a second group and in the process to fill out the 990EZ.
I think you might be confusing the threshold amount with the rule for when/if you file the annual return (990). For the application fee, the cut-off is $10,000. See excerpt below from IRS site.
The amount of the user fee depends on the applying organization's average annual gross receipts. If the organization's average annual gross receipts have exceeded or will exceed $10,000 annually over a four-year period, the fee is $750. If gross receipts have not exceed or will not exceed $10,000 annually over a four-year period, the user fee is $300. An applicant must certify its gross receipts in Part XI.
For anyone new to this - note it does say gross receipts which means everything that comes in, not just what's left after expenses (net).
Also be aware that while the orgization may need to file an annual return with the IRS once set up, it's an informational return - a typical PTO wouldn't pay federal income tax. So it's not like the application fee is just the beginning and then you'll also be paying federal taxes each year.
I'm going thru the process now. It depends on what you have set already. You need to start with Articles of Incorporation, By-Laws & a Budget/Finance idea set before you can really get into the "meat & potatoes" of the Form 1023 which is the form for getting the Certificate of Non-Profit.
The fee is based on what you are going to expect to have in gross revenue. Under $25K annually, you can apply with a fee of $300; over $25K annually and you will apply with a fee of $750.
We are keeping our Principal very informed on the process, but not the BOE. The Principal by virtue of his position is one of our Executive Board Officers.
