We don't have income over $25000 this year, but should we still file a 990EZ? If so, I don't think it has ever been done before...do I have to send in the previous years as well? We don't have any records from before last year...the treasurer never did get them. What do you suggest we do?
Thanks!

I believe the decision to run under the school's authority, or not, is a philosophical one; not a decision to be based solely on the $500 fee.

If your PTO is under the school's financial management, your money and organization is ultimately under the control of the school admin. It's possible that the admin could dictate how your group operates, how it spends and raises $, who makes decisions, who the officers are, etc. This type of parent group is like a committee of the school. You might have a great relationship with the current admin, and can't envision thte principal ever "taking over". But when your parent group is an extension of the school, the ultimate control is with the school. Many PTOs are comfortable with this model and make it work very well.

If your PTO sets itself up as a 501c3, non-profit group, independent of the school (like many, many other PTOs), your board of directors/officers and members dictate the policies of your organization. Your members decide how you'll raise $, how you'll spend it, and what events/projects you want to run. Obviously, all your work is done in cooperation with the school, but your members hold the final say. With this independence comes responsiblity to keep up with the requirements of the IRS (like filing the annual Form 990EZ), in order to retain the privilege and prestige of being a 501c3.

For a PTO with a $40,000 annual net income, you're a small business in the eyes of the IRS. Ethically, you have maybe 3 choices: run as a committee of the school and use their tax id number on your account; file for 501c3 status; acknowledge that your group is a small business and start paying federal taxes as necessary.

The $500 fee can be a show stopper, but there's more to consider than simply the cost of the application.

Thank you for your help. Currently we are not a 501,3,c and we don't want to be one. (I apprentlty it cost about $500.00 to become one.) Hence, we are having to go under the school tax ID number and they in turn will have to have a signer from the school on our bank account, or the bank will not let us use their, the schools, tax ID number. Do you think we should just bite the bullet and become a 501,3,c? The cost is holding me back.
Do you currently file a 990 form and then just report activity? Do you all use a CPA? We currently make about $40,000 a year in our PTO.

A 501(c)(3) organization with more than $25,000 annualy in gross receipts is supposed to file an informational tax return with the IRS. If it's less than $100,000, they file the 990EZ, more than $100,000 then the 990. (Generally speaking, it's just information that's being provided - they don't owe any taxes.)

But many 501(c)(3) organizations file the 990EZ voluntarily even if they are under $25,000.

From the IRS' view, anyone/anything producing income should be filing a tax return. (Lots of exceptions and variations, but it's a generic truth.) So the question is, who or what is earning income - a person or an organization? If it's an organization, what kind? Unless you are set up as a special type, like a 501(c)(3), then you are simply a business and would therefore file a commercial return. I've yet to hear of a PTO that's actually done that. Most either operate "off radar" and file nothing or become a 501(c)(3) and file the 990/990EZ.

[ 03-29-2005, 05:25 PM: Message edited by: JHB ]

I have never filed taxes for our PTO, do we need to be a 501.3.c first? Or is filing the form 990 enough?

What kind of taxes? Many of us file the 990EZ (or 990) informational return with the IRS.

And many of us file quarterly or annual sales tax payments with our state. (Being tax exempt in a state doesn't necessarily exempt you from paying all sales tax on goods sold by your organization.)