Private Schools, CPA & Tax Services

Why Private Schools in Dallas Need a CPA Who Understands Education Finance

Private schools operate under financial pressures that most CPAs never encounter. You collect tuition months before delivering instruction, issue scholarships that reduce receivables in ways that affect your revenue recognition, manage payroll calendars that rarely align with your cash flow cycle, and maintain aging facilities that create complex depreciation schedules. One misstep in any of these areas can cost your school thousands in overpaid taxes or, worse, jeopardize your tax-exempt status with the IRS.

At AG Freideman, we provide tax preparation, bookkeeping, and payroll services built around the financial realities private schools face every day. Al Freideman is a licensed CPA with over 30 years of experience, and he handles every school client personally. No hand-offs to junior staff, no seasonal associates learning your books for the first time each year. Whether you run a faith-based academy in Plano, a Montessori school in Frisco, or a college-prep institution in North Dallas, we understand the accounting challenges that make your school different from every other small business.

How Should Private Schools Handle Tuition Receivable and Scholarship Accounting?

Tuition receivable is the financial backbone of every private school, and it requires careful accounting that most general-practice CPAs get wrong. When families pay tuition in installments, your books must distinguish between earned revenue (instruction already delivered) and deferred revenue (instruction still owed). Scholarships and financial aid further complicate the picture because they reduce gross tuition but must be tracked separately for both financial reporting and tax compliance.

Here is what proper tuition and scholarship accounting looks like in practice:

• Revenue recognition timing: If your school collects $15,000 in August for a full academic year, only a fraction of that is earned income in the current calendar quarter. Recording the full amount as current-year revenue inflates your financials and, for taxable schools, can increase your tax liability.
• Scholarship offsets vs. expenses: The IRS distinguishes between tuition discounts (which reduce gross revenue) and scholarship expenses (which are recorded as program costs). Classifying them incorrectly can distort your Form 990 or your business return.
• Bad debt from unpaid tuition: When families stop paying mid-year, schools need to write off the receivable properly. The method you use (direct write-off vs. allowance method) affects both your income statement and your tax position.

We reconcile tuition receivables monthly so your books reflect reality, not just what your billing software reports. Our monthly bookkeeping packages start at $300 to $600 per month and include full bank reconciliation alongside receivable tracking.

Does Your School’s Tax-Exempt Status Affect How You File?

The difference between operating as a 501(c)(3) nonprofit and a for-profit private school changes nearly every aspect of your tax obligations. Getting this structure wrong from the start, or failing to maintain compliance, creates problems that compound year after year.

501(c)(3) schools must file Form 990 (or 990-EZ for smaller organizations) annually with the IRS. The 990 is a public document, meaning donors, parents, and watchdog organizations can review your finances. Errors or inconsistencies on Form 990 can trigger IRS scrutiny and, in extreme cases, revocation of your exempt status. Schools must also demonstrate that no private individual is benefiting excessively from the organization’s revenue, a requirement known as the private inurement prohibition.

For-profit private schools structured as S-Corps or LLCs file standard business returns (Form 1120S or 1065) and must pay attention to the Texas Franchise Tax. The franchise tax applies to entities with annualized total revenue exceeding $2.47 million, with reports due annually to the Texas Comptroller. Even schools below that threshold must still file a No Tax Due Report and a Public Information Report each year. Missing this filing can result in the Texas Secretary of State forfeiting your entity’s right to do business.

We prepare both nonprofit and for-profit school returns. Business tax preparation for S-Corps and partnerships ranges from $1,000 to $2,000, and Texas franchise tax filings run $250 to $500. Every engagement includes Al’s direct review of your return before filing.

How Do Teacher Payroll Calendars Create Cash Flow Problems?

Private schools often pay teachers on 12-month salary schedules even though instruction only spans 9 or 10 months. This creates a cash flow mismatch that, without proper planning, can leave your school short on operating funds during summer months when tuition payments slow or stop entirely.

The payroll complications go deeper than timing:

• Contract vs. at-will classification: Teachers on annual contracts may have different withholding and benefits obligations than hourly staff such as aides, cafeteria workers, or after-school program coordinators.
• Payroll tax deposits: The IRS requires semi-weekly or monthly federal payroll tax deposits depending on your total liability. Schools that miss deposit deadlines face penalties starting at 2% and climbing to 15% for deposits more than 10 days late.
• Summer pay accruals: If you accrue summer payroll during the school year, those accruals must be recorded correctly on your books. Mishandling this distorts both your monthly financials and your year-end tax position.

We handle payroll processing alongside bookkeeping so your payroll calendar and cash flow reporting stay in sync. Our monthly bookkeeping and payroll packages range from $300 to $600 per month, and we time everything so your school never faces a preventable cash crunch.

What Depreciation Strategies Apply to School Facilities and Equipment?

Private school campuses involve substantial capital investments in buildings, playgrounds, technology labs, athletic facilities, and classroom equipment. For taxable schools, depreciation on these assets is one of the largest deductions available, but only if you classify and schedule each asset correctly.

Buildings are generally depreciated over 39 years under the Modified Accelerated Cost Recovery System (MACRS). However, specific building components, such as HVAC systems, roofing, and electrical systems, may qualify for shorter recovery periods through cost segregation studies. Classroom technology (computers, smartboards, AV equipment) typically falls under a 5-year recovery period and may qualify for Section 179 expensing or bonus depreciation, allowing your school to deduct the full cost in the year of purchase rather than spreading it across multiple years.

For 501(c)(3) schools, depreciation does not reduce a tax liability (because there is none on exempt activities), but it still matters for accurate financial statements, grant applications, and donor reporting. Understating depreciation makes your school look more profitable than it is, while overstating it can raise questions from auditors or grantors.

We review your school’s fixed asset schedule annually and ensure every item is classified under the correct MACRS category with the right recovery period. This is part of our tax planning services, which start at $197 for a one-time strategy session.

Private School Tax Mistakes We Fix

After 30 years of working with Dallas-area businesses, we see the same accounting errors at private schools again and again. Here are the most common ones we correct for new clients:

• Recording all tuition as earned revenue upon receipt instead of deferring the portion tied to future instruction. This overstates current-year income and can increase tax liability for taxable schools by thousands of dollars.
• Mixing scholarship discounts with charitable contribution records on Form 990, creating inconsistencies that the IRS flags during review.
• Failing to file the Texas franchise tax No Tax Due Report because the school assumes its nonprofit status exempts it from all state filings. Nonprofit 501(c)(3) organizations are generally exempt from the franchise tax, but the exemption must be properly established with the Comptroller, and the Public Information Report is still required.
• Misclassifying part-time coaches and tutors as independent contractors when they meet the IRS criteria for employees. This exposes the school to back payroll taxes, penalties, and potential worker misclassification audits.
• Depreciating building improvements over 39 years when component elements qualify for 5, 7, or 15-year recovery periods, leaving legitimate deductions on the table for years.

If any of these sound familiar, we can review your current setup during a free consultation and identify exactly what needs to be corrected. Call Al directly at (972) 893-3481 or book a time online.