As your performance season ends, like me you may be looking to thank all the volunteers whose hard work made your projects possible over the past year. You might feel a little guilty about all the effort they put forth on your behalf and want to spend a little more money than you planned in showing your appreciation.
However, according to a post by the For Purpose Law Group, there is such a thing as being too appreciative and you can create more problems for your volunteers than you intended.
For example, technically giving a volunteer a $25 gift card is taxable and you as the organization are supposed to withhold taxes.
Stipends or cash gifts of any amount (even allowable “nominal” stipends to bona fide volunteers) are generally taxable income. The volunteer recipient must report the amounts on his or her tax return and pay applicable taxes AND the organization must withhold taxes and make FICA payments – just as it does for employees.
Yeah, I did not know that either.
The other wrinkle is if you pay volunteer a stipend. A volunteer can’t be paid a stipend in return for their services, but you can use it to help offset expenses they might incur. This is something community theater groups often do with their cast and crew. Even in this case, there are some strict guidelines which apply.
Pay particular attention to the last paragraph.
“Although a volunteer can receive no compensation, a volunteer can be paid expenses, reasonable benefits or a nominal fee (or any combination) to perform … services.”
“…(A) fee is not nominal if it is a substitute for compensation or tied to productivity.” And “… determining whether the expenses, benefits or fees would preclude an individual from qualifying as a volunteer under the FLSA requires examining the total amount of payments in the context of the economic realities of a particular situation.”
The agency “presumes that fees paid to volunteers are nominal as long as the fee does not exceed twenty percent of what an employer would otherwise pay to hire a full-time employee for the same services.”
But – and this is a big “but” – if the “volunteer” receives anything of value exceeding $500 a year, that person must be treated as paid staff or as an independent contractor and relinquishes important liability protection under the federal Volunteer Protection Act (as well as becoming potentially liable, in the case of independent contractor classification, for a whole slew of self-employment taxes).
I point out that last paragraph because it is easy to hit that $500 threshold. Paying someone $100 for six weeks of rehearsal and a performance as gesture of acknowledgment and to help defray gas doesn’t come close to really paying them what they are worth. But it is so very easy for a really dedicated person to hit $500 over the course of a year. (And remember, there is supposed to be a reporting of income and withholding on each of those $100 payments.)
It appears that the prohibition against tying the stipend to productivity means you can’t provide a larger stipend to crew heads than to the crew or give everyone who did 250 volunteer hours a $25 gift certificate and everyone who did fewer hours a $15 gift certificate.
“A test to help evaluate whether a payment to a volunteer is a compensation substitute is “whether the amount of the fee varies as the particular individual spends more or less time engaged in the volunteer activities.”
In their suggestions at the end of the post, authors May Harris and Linda Rosenthal, say the best solution may be a bouquet of flowers rather than a gift card. I think other modest gestures like appreciation meals probably qualify as well, assuming you aren’t serving caviar.
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