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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
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Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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I would like to start a social savings club except under IRS.

Resolved Question:

I would like to start a social savings club except under IRS. I would get and EIN number for banking purposes. The savings club would consist of members saving for their childrens tuition for private schools. As a type of non profit organization we would be able to sell scrip and use the profit for its members to pay tuition. My question is , is this in anyway illegal. Can my children benefit from my socail savings club. Is a social savings club considered a non profit organization. Can you pay for education through a social savings club?
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.
HelloCustomer

This would not be considered a social club. A social club is a club that is organized for the recreation or pleasure of the members, and other non profit purposes.

The statute prohibits exemption if any part of the organization's net earnings inures to the benefit of any person having a personal and private interest in the activities of the organization. None of the members would be allowed to use the proceeds from the club to pay for tuition for their children at private schools.

I am giving you a link to a section of the IRS website that defines the rules for social clubs and how they maintain tax exempt status.

http://www.irs.gov/charities/nonprofits/article/0,,id=96189,00.html

If this was helpful please press the Accept button.

Thank youCustomer

Customer: replied 4 years ago.

That makes sence. Maybe you may be able to answer a follow up question. IN order to sell scrip you have to have an EIN number and a bank account with the organizations name on it. There are several sports programs that sell scrip in order to pay for uniforms and team costs. How would they file under IRS for an EIN as a none profit organization if their profits benefit there own team? Basically what I am trying to do open a bank account under my organziations name so I can sell scrip which is discounted gift cards and you sell them to family members at the face value. All of my profit would go right to my kids private school. If you can shed any light on that I would really appriciate it. Thank you for your help

Expert:  MequonCPA replied 4 years ago.

DearCustomer-

 

The organizations are usually sports "booster" clubs and they are chartered non-profits affiliated with the school's athletic departments.

 

You would want the organization to be affiliated with the school, like a PTA/PTO. The group could then file for non-profit status as a 501(c)(3) organization. I have provided a link to the CA PTA web page. Information on this page may be able to assist you.

 

I have also included a link to the IRS web page for information relating to the application for non-profit status.

 

The easiest way would be for you and the other parents to work within another organization already serving similar needs for your children. That way you wouldn't need to set up a new entity.

 

http://www.capta.org/

 

http://www.irs.gov/charities/article/0,,id=96122,00.html

 

MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2323
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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