Hello I would appreciate any thoughts, comments and advice on the subject. I have been teaching karate for many years now for free. Accepting donations if given with most years not having donations cover my costs for giving the classes. While I don't mind putting in for the rest to cover the overhead it would also help if I could write off such expenses on my income taxes. Other advantages would be to put myself as an paid employee so I can deduct my own training costs and other MA related expenses as it would now be my profession. My students could now also write off their donations. My main purpose is to spread the martial arts and the NPO model seems perfect for my goals. Thanks for your thoughts.

You need to register as a Not for Profit Organisation.

Make sure that the School is a stand alone organisation and you and the other "Staff" are listed as volunteers. I'm not sure about the US but in the UK it means that The school is not liable as a whole for any taxes due, just for income into its own account. any out of pocket expenses by volunteers I believe are concidered and are acknowledge by any tax returns etc on the individual not thew school.

It's quite complex but if you have people who can assist Free of Charge with setting this up.

First thing is a Bank Account in the clubs name with more than 1 signatory. (this could mean every payment cheque needs 2 signatures to process - thus protecting the little money there is and preventing unnecessary payments of "advertising" etc)

Wish you luck my friend

?there is no school. Or are you speaking of structure I teach out of? I'm against being listed as a volunteer because as a volunteer I have less a can write off on taxes personally. As an employee I can write off any seminars and my own fees that I pay my instructors.

Well my friend, IF you want to give these guys the TAX returns etc then you have to do it otherwise carry on keeping your "School" as an underground group that is "exempt" from Tax etc.

It's more about giving myself tax relief from money I already donate and don't get credit for. Plus benefits of getting things at wholesale prices and added liability protection. Actually being an underground group would be considered a hobby and if I should come out with more money at the end of the year I would be liable to pay taxes on the profit.

If I were you I would get a really good accountant--esp in NY.

"Non-profits" are generally required to keep really detailed records beyond that required for a "for profit" business.

You could get many if not most of the same benefits by self-incorporating without some of the headaches.

Then again I really don't know the tax structure for NY.

If most years the donations by your students don't cover your expenses for classes then I'm not sure that going NPO is really going to help you much--you will still be coming up short in terms of out of pocket payments.

Maybe I'm misunderstanding???

If I self incorporate the IRS will deem the my martial arts school a hobby if I am losing money majority of the time in a 5 year period. So as a hobby I cannot claim loses or expenses but would still have to claim profit if I should ever have any and have to pay taxes on it.

With the formation of a NPO I can always deduct what I put in to conduct my classes.
I don't believe NPO have any more to keep a track of than for profit businesses. Either way there is so little going on with in the way I'm teaching. There is not much to keep a track of.

Jaedeshi

If there is "so little going on" then why worry about it?

Just asking.

Again, I don't know the specifics of NY but often the IRS pays pretty close attention to various "deductions."

You should see the hoops you have to jump through to quantify/qualify for deducting for expenses related to a home office.

Very little experience in dealing with Not For Profit.

If you are losing money consistently then you should be able to use those losses as deductions--provided that you can establish you are not losing money on purpose in order to get those very deductions.

The problem as already stated the IRS will take the average of five years and when you average more losses than gain then you can no longer take those deductions. The IRS will classify your venture as a hobby which you cannot not take deductions for any year you have lost money. They will however allow the deductions in a year when you gained money in which case you are claiming to pay taxes on your profit.

"By little going on". I mean that there is little to keep a record of. I'm not collecting dues, fees, or doing any paid advertising, not selling any equipment or uniforms. Basically I pay for heating and insurance and collect donations. Once I start the NPO nothing has to change in the way I do things less filing a IRS form each year.

When I retire I would like to continue teaching. Again I wouldn't be teaching for profit. So NPO is the appropriate business model.

jaedeshi

Maybe--hope it works for you....seriously.

Just not convinced that its as easy you make it out.