speaking of old wives tales, I think the IRS has bigger worries than 100,000 nonprofit parent groups. There's no way they're going to audit every parent group. I could see them putting a bit more focus there but that's it.
The balance you keep does matter. First of all if you gross (not net) over $25,000 you must file a form 990 with the IRS. We have an account in our town who specializes in PTA's (PTO's) and we have her do a yearly audit and file any necessary returns. Although there is no set amount for what you can carry over the IRS watches to see what you do carry over. Since we are non-profit organizations they expect most of the funds to be spent the year they are raised. If you continuely carry over or carry over a lot they will say that you are making a profit since you aren't spending all your funds. Alot of people are under the impression you are only allowed to carry over $500 but that's an "old wive's tale". If you do have a large amount left, say over $1000-1500 you can include a projected budget for why and what that money is being carried over for. For example, our PTA sets up a summer budget at the end of every school year so that we may work on things over the summer. We include things like training (PTA has a summer academy in our state), supplies, membership drive, back to school night, handbook, audit, etc. If our PTA doesn't gross over $25,ooo and have to file a 990 we include this budget in our year end books/annual report (or whatever you might call it) anyway just in case we were to audited by the IRS. Speaking of that, just a heads up to everyone, PTA was notified 2 years ago by the IRS that by the year, I think, 2003 (don't quote me on the date) they are going to audit all PTA/PTO/PTG's etc., that they're going to crack down on them. This is what our state office and board has told us anyway! So you might want to be prepared. Hope I've helped.
I've not encountered anything about the BALANCE being an issue, just gross receipts during the PTO's fiscal year. Maybe I just didn't pay attention, as our policy is to spend down to about a $3000 balance at the end of each school year. However, if we were working on a long-term plan, like a playground, we could easily be carrying forward larger amounts.
Could you elaborate on what you meant? I'd appreciate any information.
[This message has been edited by JHB (edited 01-24-2001).]
Taxes become much more complicated for a nonprofit if you carry a balance of more than $25,000 from one fiscal year to the next, but you can get around that by planning ahead and having a projected budget for the coming year before you file taxes.
There are 2 different issues. One involves being a non-profit (at the state level), the other involves being tax-exempt (at the federal level).
You'll need to check your state law as to state levied taxes like sales tax. Here in Texas, as a non-profit, we can are exempt from sales tax on two calendar days per year. (But if it's something like a 3 week product sale - the whole amount is rolled into the 1 collection date.) So we might have a catalog sale in the Fall and a carnival in the Spring. Most everything else from our fundraising is subject to state sales tax.
At the federal level, the status is called "tax exempt". From what I've read, the amount doesn't seem to be an issue as long as it's related to your core mission/business activities. But note, there are some things that might affect a PTO. For example, advertising for a directory or newsletter that exceeds $1000 is considered "Unrelated Business Income (UBI)". That has to be reported as such and is subject to federal taxes. Other than that, it just seems the reporting requirements may get more complex as your gross amount hit certain levels like $25,000; $100,000, $1,000,000.
[This message has been edited by JHB (edited 01-21-2001).]
