Momof2Gals - I think maybe the easiest way you can find out if your PTO is a registered 501(c)(3) charity by contacting the IRS at their toll-free line (see JHB's post for the number).

You will need to have the "tax id" number that was used to set-up your PTO's bank account. This number is also called an EIN or employer ID number and some people call it a tax-exempt number. In any event, the bank would have required some kind of id number for the account. Get that number first.

Now, before you call the IRS, check the number: is it a personal social security number of a current or past member? If so, then your PTO is not a 501(c)(3). Is the tax id number the same as the school's or the district's? Ask your school's business manager to look up the number and compare. If the PTO has been using the school's id number, then you are not an independent organization from the school. If the number is unique, then call the IRS and ask them to check its status.

If your PTO does not have its own tax id number, in most cases, you would want to have the IRS assign one, and then move forward with formalizing your group as a 501c3 charity. At that time, the PTO would be required to file the annual return, Form 990. But we're getting ahead of ourselves.

As mentioned above, if a group is functioning like most PTOs--with income and expenses--and it is NOT a registered non-profit, then techincally it probably would be considered a business and be subject to the responsibilities of a business like paying taxes. And while there are probably examples of non-registered PTOs being investigated by the IRS, it's not something making the news. Start the education process by researching your PTO's tax id number, then come back and read the posts about filing for non-profit status. Or consider joining NPN to get the start up guide which addresses these issues.

[ 03-25-2004, 11:48 PM: Message edited by: Critter ]

We did the same thing. Same name, little difference in our day-to-day operations. But our "new" PTO was born about 4 years ago with a new EIN, new bylaws, and a 501(c)(3) filing.

Aside from the hassel of dealing with previous years' issues, I didn't have good records or personal knowledge from the preceding era (and all this came on the wake of an embezzlement). Starting over with a clean sweep was definitely the easiest route.

If someone did have a question about pre-2000 finances and the old PTO, I doubt anything (in writing) exists as far as records. That wasn't by done intent, the current officers didn't control it then, but it's probably for the best.

Critter's right - look forward, not backward.

[ 03-25-2004, 11:43 PM: Message edited by: JHB ]

After at least 15 years as an "under the radar" PTO with no EIN of our own, we became educated through this site. We filed for incorporation in our state and then filed Form 1023, the application for 501(c)(3) status as a brand new organization (with the same old name). No problem from the state or the IRS.

As far as the IRS is concerned, your organization was formed the day your were incorporated, regardless of how long your group operated before being incorporated. The inc and 501(C)(3) filing had virtually no affect on our PTO's day to day operation - we used the same bylaws we'd had in place with very minor changes, we kept the same name, the same fiscal year, the same mission, purpose and activities. When we completed form 1023, we did not have to report any history, since the IRS says we were just formed. We started with a clean slate.

To repeat a common qualifier: I am not a CPA and I don't work for the IRS...but it's my opinion that the IRS is far more interested in your group getting set up properly TODAY and doing things right going forward, than it is in penalizing PTOs like yours (and ours) which have simply been ignorant of the rules in the past.

I would have a completely different opinion if your PTO was already a 501(c)(3) and no one had filed your annual returns. In that case, your group might be subject to late filing penalties and groveling to the IRS would be step one.

Think of it this way: your PTO is just now getting educated, rather than that it has been delinquent. Go forth and incorporate!

I thought at first you were trying to get someone to unravel tax returns for prior years. But if you aren't listed as a 501(c)(3) I just don't know that this is a can of worms you want to open. Personally, I'd let it go and recommend the group start the process for next year.

I do some work with one PTO that is not a 501(c)(3). They make more than $5000 a year, but are really small potatoes. When I started with the group I was gung ho to help them get organized "correctly", but I soon discovered it is way too informal of a group. The information simply would not transition from one year to the next. The worst thing in the world I could do is help them set up formally so that the IRS and state are expecting information each year. It would be a disaster waiting to happen. (Example, if they are supposed to file and forget - the penalty is $20 per day.) Wrong or right, that group needs to keep operating like it always has.

This stuff isn’t that hard, but it takes commitment and continuity. I supposedly know what I'm doing, and I spent 6 months resolving a $1800 penalty that was the result of a clerical error I made on the 990 one year (for our other PTO that is a 501). I knew the penalty would eventually be waived, so it was no big deal. But someone else may not have been prepared to deal with the IRS like that.

However, if you really want to move forward with this, call the IRS. The Tax Exempt division is really great and they'll give you good advice. Typically, there's little or no wait time on their toll-free line, but they may be a bit busier this time of year.

IRS Exempt Organization customer service toll-free line 1-877-829-5500. Hours are 8:00am - 9:30pm EST Monday-Friday.

And here's a link on non-profit Filing Requirements.

www.irs.gov/charities/article/0,,id=96103,00.html

Note, organizations that make less than $25,000 do not HAVE to file the 990/990EZ informational return. However, it's a good idea to file every year to help keep your status active (especially for donors claiming charitable contributions).

[ 03-25-2004, 11:09 PM: Message edited by: JHB ]

Thanks, playing it safe. I actually have done all of the above, and we do have a tax id #. I'm just stuck with finding an accountant who states that they're capable of doing the taxes. As far as the personal liability goes...I'm in it knee deep.

Let me answer this one without logging in (yeah- like you don't know who I am).

Sometimes, there's doing what is right and then there's the real world of compromises and grey areas.

One unofficial rule of thumb is whether or not your PTO makes $5000 or more (GROSS, not what you keep) each year. If you read the IRS regs, then yes, of course your PTO should do everything by the book. They should file a tax return every year. Here's news flash - your PTO is a BUSINESS. If you aren't listed as 501(c)(3) non-profit, then you are just a regular business and probably should be filing a business return.

So you've taken charge of a PTO that's never done anything official, never filed with the IRS. What can you do?

1) Contact the IRS, grovel, explain the situation, ask for help, do what it takes to fix things, maybe even retroactively.

2) Continue to operate "under the radar".

3) Start a new PTO (might even have the same name) from the ground up and follow all the steps to set it up officially.

#1 Based on conversations I've had with the IRS, I THINK they would work with you and this wouldn't actually be that much different than number 3. However, would I personally take that chance? Probably not.

#2 Lots of organizations never file anything. It may not be right, but it's common. Think of all the organizations (sports, PTO, clubs) that your kids are in. How many do exactly this and never report a thing? Would I be involved in a well-intentioned, but off-the-books organization? Yes. Would I take a leadership role? No - too much personal risk. Probably nothing would ever happen. But I couldn't even honestly plead ignorance if it did.

#3 Clean slate. That's my choice. As a group, maybe you aren't legally free and clear of the old org, but I feel much more comfortable saying, "Our PTO was setup on XYZ and we've followed these steps, and if you have questions about the accounting procedures from previous years, please contact previous officers".

I'm not a lawyer or an accountant - these are just my opinions. Good luck!