So you'll need to check with agency in charge of that in your state. I think it's usually it's handled by whatever agency collects taxes (like the Comptroller) or the one that establishes business entities (like Secretary of state).
So go to your state's main web site: www.state.xx.us
(replace XX with your 2 letter abbreviation)
If it's not obvious where to go from there, you can usually do a search on key words like "tax exempt" or "non profit" or "sales tax".
I agree with the items from the other response you received. We however did not incorporate as in our state we were advised that it would not provide us any additional benefits or protection under the law. I would check with your secretary of state to confirm your need to incorporate before doing so. Incorporation will sometimes cause additional annual reporting requirments at the state level.
One addition item to note about tax exempt status is that if you do
not file for 513(c)(3) status and your receipts are over 5,000, your income is taxable and your doners do not receive a charitable contriubtion deduction on their personal tax return. This is a big thing when asking for donations from businesses and individuals.
No, they aren't the same. At the state level, you are talking about sales tax on purchased/sold items, and perhaps state income tax. For the federal level (IRS), it's the federal income tax.
A PTO that is going through the steps to organize officially has things happening at 4 different levels simultaneously (Federal, State, Business, Programs).
Federal/IRS
1) Get an EIN# (Employer Identification Number)
Kind of the business equivelent of an SSN
Very simple - handle by phone, internet, mail. One page form. No fee.
2) Apply for status as an official non-profit, called at 501(c)3. Typically should be done if the group has income greater than $5000 GROSS. (Requires some time investment to complete the forms and $500 fee.)
State
1) Get set up in their system as a tax payer. (Will probably have an ID linked to the EIN).
2) Incorporate as a non-profit (changes the group from a collection of individuals into a legal business entity, so offers some protection to offiers/board members if you were to get sued.
Note - if you plan to do this, take care of it BEFORE filing for 501(c)(3)
This is usually pretty simple. State usually has forms/templates, small fee. (Like $25)
3) Apply for tax exemption at the state level. (Rules vary depending on state. Might have to be a 501(c)(3).
4) Maybe need some permits for certain activities, such as bingo or raffles. Usually take care of thsoe as they arise.
Business Setup
1) Open checking account (have EIN first, do NOT use someone's SSN)
2) Write organizing instrument and bylaws. Note, there are some requirement to conform with IRS regs if you plan to apply for 501(3)
3) Define structure/elect officers
4) Cash handling processs
5) other policies
Programs
Start planning programs/activities
Note - you might want to search the forums, especially the Legal/Roberts Rules section for more info. Use "501" as a key word in the search - you'll find quite a bit.
Our school is in the process of starting a PTO (currently we are PTA) and I am curious what are the benefits of filing for 501c3 status? If we register with the state for a tax exempt number does that cover us for purchases? We are a small organization with less than $25,000 in income per year. :confused:
