Financial Policy

HSLDA’s passion is to help the homeschool community thrive. And for that to happen, the groups that serve the homeschool community need to be strong and legally sound. As the founder or administrator of a homeschool group, one critical area that you must think about is finances—something that can be difficult to understand!

A key truth to remember: when money gets involved, the amount of government regulation goes up significantly.

When it’s just five homeschool families meeting once a week to do a literature class, there’s not really much potential for legal problems. But when that literature class becomes wildly successful, grows to 50 families meeting twice a week for gym classes, science labs, and high-level math courses taught by local college professors—with tuition and other fees involved—well, there can be issues.

HSLDA has addressed many of those issues in our in-depth article about how to start a homeschool group legally. This article will examine the fundamentals of what’s involved when money starts changing hands.

Money matters

The first critical consideration in accepting tuition, fees, etc. is how you will account for that money. Do you have a treasurer position in place as well as tools (Quickbooks or something similar) to track income and expenses? If you are paying your teachers, are they supposed to pay taxes on the money they are getting? (Our answer: maybe.) Does it matter if that money is for teaching, or just reimbursement for buying craft supplies? (In short: yes.)

One of the most important decisions that a homeschool group needs to make on this topic is whether the group is going to be structured as a business or a nonprofit. Though there are benefits to each choice, the nonprofit path is the preferred path for most groups.

(If you aren’t quite at the point where you want to fully establish your group as its own entity, another option is using a statewide homeschool group or church that is already an established nonprofit as an “umbrella” for your group—read this article to learn more.)

There is a lot of information available for homeschool groups to research what is best for their needs. Some great places to start are Homeschool CPA, Charitable Allies, Church Law and Tax, as well as this Facebook group specifically for homeschool group leaders to ask questions and get answers from other experienced leaders. And you can always contact HSLDA Group Services if you need assistance answering questions your group may encounter.

Don’t forget the tax man

One mistake that HSLDA has seen many times is when a group begins the process of financial compliance, and then never finishes it. Lack of follow-through in this area could bring serious consequences to your group.

For instance, if your group gets a tax ID number from the IRS so that you can set up a bank account to deposit all the membership fees for your group, and then you don’t end up filing your group’s nonprofit status with the IRS, there may be tax problems down the road.

The IRS may be interested in where that money is coming from, how much there is, and (most importantly to the IRS) how much of it should be paid to the government in taxes. After all, the IRS reasons, if your group isn’t a nonprofit, then it probably should be paying taxes.

An even more serious complication can come about if your group is using an electronic app like PayPal or Venmo to collect fees and tuition. That payment app account is often linked to a person’s Social Security number, as well as the group’s tax ID number, and if the group has not formally established its nonprofit status with the IRS, the person connected with the account might be contacted by the IRS with a demand that the person pay taxes on the group’s income.

If your group is channeling about $25,000 a year through PayPal, which many do, those taxes could add up to a substantial amount! Bottom line—it is almost never a good idea to have a group’s funds processed through a personal financial account without talking to your tax advisor first.

The moral of this story is simple: if your homeschool group is bringing in money, you need to be proactive in making good legal decisions about how to handle that money. Determine your group’s status with the IRS, have a plan on how money will be handled, and accountability for the process.