Can someone please change this to the running chess tournaments category? For some reason I can’t do so myself. I am listed as a Club TD and my club is a USCF affiliate.
Anyway around a year ago I started a small chess club. No required dues, occasionally asked for donations to help cover equipment etc. https://chess.maynard.wiki
However now I’m planning on running monthly tournaments, so there will be significantly more cash flow. I may also make some membership fee mandatory as that seems to be a 501c7 requirement and 501c7 so far seems to be the consensus choice for small clubs. I think I also need to require all or most of the tournament participants to become members.
It seems like getting a DBA for the club and opening it’s own checking account are obvious moves to avoid confusion.
So my question is, does 501c7 sound right? How do you include the club in your taxes? What software do you use and would you recommend it? I’m looking at Zoho Books as it’s free for under $50k businesses. But perhaps it’d make more sense to use Quicken Simplifi and Schedule C?
What follows is neither tax nor accounting advice, but I want to point out that USCF is a 501(c)(3) devoted to, per their publicly filed Form 990:
US CHESS PROMOTES THE STUDY AND KNOWLEDGE OF THE GAME OF CHESS, FOR ITS OWN SAKE AS AN ART AND FOR ENJOYMENT, BUT ALSO AS A MEANS FOR THE IMPROVEMENT OF SOCIETY. IT INFORMS, EDUCATES, AND FOSTERS THE DEVELOPMENT OF PLAYERS (PROFESSIONAL AND AMATEUR) AND POTENTIAL PLAYERS. IT ENCOURAGES THE DEVELOPMENT OF A NETWORK OF INSTITUTIONS DEVOTED TO ENHANCING THE GROWTH OF CHESS, FROM LOCAL CLUBS TO STATE AND REGIONAL ORGANIZATIONS, AND IT PROMOTES CHESS IN AMERICAN SCHOOLS
There is no particular reason your club couldn’t do all of this, at least on a more local level.
A sufficiently small organization is eligible to file the 1023-EZ electronically for $275, and 80% of those filings are addressed inside of 22 days.
The status might or might not be useful when dealing with local organizations / governments / companies in trying to rent venue space or solicit donations / sponsorships, but again just pointing out the option and giving neither legal nor tax advice.
I should first clarify that the club is a separate entity. A nonprofit’s income should not be included on the tax returns of its officers because they do not own it.
Maybe it is different in your state but you probably do not need a DBA (i.e., doing business as name). That is relevant if you are a sole proprietor doing business under a name other than your own without having incorporated (or a legal entity exists and it wants to use a different name in commerce). You may want to think about incorporating as a nonprofit corporation though. I cannot say, however, how important that is or what that looks like in your state. You will need to talk to someone with state specific knowledge on that.
I have used Wave Accounting for bookkeeping in my chess business for several years now and have been satisfied with it. There are paid services you can purchase (like payment processing) but the basic bookkeeping and invoicing is free.
501(c)(7) status could be problematic for your club if you intend (now or in the future) to hold chess tournaments (or potentially other activities) that are open to nonmembers. Depending on the circumstances the requirements to preserve your status (including recordkeeping) can be complicated. Reviewing this revenue procedure may help: https://www.irs.gov/pub/irs-tege/rp71_17.pdf
I should also point out that 501(c)(7) organizations have annual filing requirements just like 501(c)(3) organizations. So I suspect that quite likely 501(c)(3) status will be easier in the long run. Also, you may be able to get state tax exemptions as well (such as sales tax) depending on state law. Discounted rates on postage is another benefit.
I should qualify that this is intended for educational purposes only and is not a substitute for legal or tax advice.
I am not a lawyer nor a tax specialist. But, per the IRS website:
"Note.
Most organizations seeking exemption from federal income tax under section 501(c)(3) are required to complete and submit an application. However, the following types of organizations may be considered tax exempt under section 501(c)(3) even if they do not file Form 1023 or Form 1023-EZ.
Churches, including synagogues, temples, and mosques.
Integrated auxiliaries of churches and conventions or associations of churches.
Any organization that has gross receipts in each taxable year of normally not more than $5,000.
"
So, if you gross less than $5k, according to this, would you even need to file for the status?
Yes, that is correct. No 1023-EZ would be required. However, the annual filing would still be required (which fortunately is very easy if you have gross receipts under $50,000).
Your assertion is philosophically unsound. The validity of a statement is not dependent upon its maker. My statement is either true or false. If it were to be recited by a professional it is not any more true or false.
I made no claim as to whether the statement was valid, I said it was worthless. It was not paid for, it was not made citing professional expertise, and it was not backed by malpractice insurance.
Notice that the attorneys and accountants (and there are several of both active in the forums) have kept quiet on this topic–wisely so.
I restate the only guidance that is truly useful: Seek the advice of a professional.