While booster clubs might feel like they’re all fun and games there is a lot of rules, regulations, and guidelines set by the federal government that must be followed to a T. The IRS booster club guidelines are possibly the most important, especially with the financial nature of a booster club.
The IRS and Booster Clubs
Booster club organizations are typically nonprofit and therefore qualify for tax-exemption. During the initial paperwork for starting the chapter, 501(c)(3) paperwork is filled out and submitted to the IRS to qualify for the tax-exemption. By doing this, you agree to follow all of the rules and guidelines for a nonprofit.
Other IRS booster clubs guidelines and rules include:
Making sure that no person(s) profit from the booster club
IRS booster club guidelines explicitly state, “none of its earnings may inure to any private shareholder or individual.” This means that no one can receive incentives, monetized or otherwise if it leads to the benefit or advantage for any individual. Everyone must be treated fairly and given the same equal chances at success.
The IRS is very heavy-handed on making sure that there is a fair playing field for everybody. They even require private school groups to be non-discriminating racially. They have to make racially inclusive publications in newspapers, commercials, or other means as a way to show fairness for all races.
Distribute the finances equally among students
Speaking of fairness, one of the more aggravating IRS booster club guidelines is that they have to distribute the funds evenly among students regardless of individual participation. This means that students who don’t participate in any of the work still get to benefit off of the ones who do.
While this can be annoying to think that those who put in no effort get all of the rewards and piggyback off of the hard-working individuals, it makes taxes a lot easier for the booster club as well as families. Families can report fundraising credits to the IRS as income and booster clubs putting money into student accounts based on participation can be seen as an unfair advantage to select students.
File an annual information return
Federal Booster Club Guidelines state that private organization must file a yearly update with the IRS using Form 990-EZ. The exception to this rule is churches and other government-related organizations.
The IRS rules for booster clubs is pretty simple and straightforward. While the paperwork might seem atrocious, there is a good reason for everything. Booster club IRS documentation helps to make sure that the booster club government guidelines are being followed.
IRS booster club guidelines are to remain responsible for all of the financial activities and aspects of the group.
A few things that your booster club could do to help follow the IRS booster club guidelines:
- Elect a treasurer
- They will be in charge of recording, documenting, and keeping the financial activities organized.
- Stick to regular business practices for maintaining financial control
- Including but not limited to keeping financial statements, bank statements, and having them reported at each booster club meeting.
- Create and maintain a budget
- Having a budget with projected revenue and expenses can help to keep the booster club on track with their financial goals.
- Consider hiring an auditor
- This will help you to make sure that all of the I’s are dotted and T’s are crossed. Making it much easier to meet the IRS booster club guidelines because someone does the paperwork with in-depth knowledge and understanding of how it works.
Another thing that could help with following the IRS booster club guidelines is making sure that you keep a good deal of financial statements handy. This can help you to track and accurately record all of the money coming in and out of the booster clubs bank account at any given time.
Financial statements may include:
- cash receipts
- cash disbursements
- checking account beginning and ending balances
- balance sheets
- income statements
- other relevant items
Why keep a record of your booster club finances?
It’s essential that your booster club keep financial records and books to show that it complies with the IRS Booster Club Guidelines. A great recordkeeping system will help with preparing the proper IRS documents for booster clubs and nonprofits such as Form 990. Failure to comply with adequate returns may result in the booster club losing its tax-exempt status.
Not only does an excellent financial tracker help with filing the proper tax forms, but it can also be used to benefit the booster club. Records can show exactly which fundraisers are successful and which ones are not. This is an excellent and insightful tool that can lead to the further success of the booster club by its members.
Record keeping is also suitable for UBIT purposes
By adequately tracking expenses and revenue, you can also follow the costs that are subject to UBIT. UBIT is unrelated business income tax and is an income, and a tax-exempt organization that makes over $1,000 or more in gross revenue from UBIT have to report it on Form 990-T.
“The obligation to file Form 990-T is in addition to the obligation to file the annual information return, Form 990, 990-EZ or 990-PF. Each organization must file a separate Form 990-T, except title holding corporations and organizations receiving their earnings that file a consolidated return under Internal Revenue Code section 1501”. [Source]
What records should be kept?
With exception to a few specific cases, the law does not explicitly tell nonprofits the proper process for recordkeeping. This means that it is left up to interpretation and that an organization can choose any form of recordkeeping that works best for them.
The most important thing about your booster clubs recordkeeping is that it shows the income and expenses of the organization. This means that for an accurate recordkeeping system, you must keep a record of all of the transactions. You can use a ledger or notebook, checkbook or an actual record book to track the finances, but do so carefully to make sure that the financial record is accurate or else it may take a lot of additional work to find any mistakes. The files must match with the bank account.
When you know the IRS booster club guidelines and stay organized, following along with the proper documentation and deadlines for submission can be made much more manageable.