HSLDA’s passion is to help the homeschool community thrive. Part of that effort is helping homeschool families join groups that will assist them in their homeschool endeavors. And for that to happen, homeschool groups need to be strong and legally sound.

One piece of advice that I give homeschool groups constantly is that when money gets involved, the amount of regulation goes up.

When it’s just five homeschool families getting together 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, including the definition of homeschooling in your state, tutors, zoning, daycare, and child protection policies.

Money Matters

But one very important warning for groups is that as soon as money starts changing hands, you need to think about how that money will be accounted for. Are teachers supposed to pay taxes on the money they are getting? (Maybe.) Does it matter if that money is for teaching, or just reimbursement for buying craft supplies? (Yes.)

One of the most important decisions that a homeschool group needs to make as soon as money starts changing hands is whether the group is going to be structured as a business or a nonprofit. There are benefits to each choice, although as I tell groups, because I like seeing homeschool groups pay as little to the government as possible (and because I work for a nonprofit), I tend to lean toward the nonprofit way of doing things.

There is lots of information available for homeschool groups to research what is best for their needs, and HSLDA Group Services is available to help you figure out some questions you might need to address in this process.

However, I’ve run across several groups recently that have gotten the process of financial compliance started, and then never finished. And that can cause serious problems.

Don't Forget the Tax Man

For instance, if your group gets a tax ID number from the Internal Revenue Service so that you can set up a bank account to deposit all the membership fees for your group, but then don’t establish 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 comes 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 make good legal decisions about how to handle that money. I often recommend to groups that they consult a CPA or a small-business/nonprofit attorney before they get in trouble, because it will be a lot less expensive than trying to fix things after the IRS gets involved.