Volunteer Incentives or Compensation?
by Melanie Askew, CPA, Senior Associate
Posted on September 23, 2014
Many non-profits could not accomplish everything they do without the help of volunteers. Of course you want to recognize and reward them for all they do for your organization. How can you recognize all your volunteers do for you and remain compliant with the IRS guidelines regarding recognition of taxable income? Where is the line between incentives and compensation? Why do you care about this anyway? Noncompliance with these requirements can result in higher payroll taxes, fines, and more.
Volunteer Gifts or Incentives
It is normal and acceptable to consider presenting volunteers with thank you gifts. Generally these are what would be considered “token” gifts. These could include things such as a small gift bag, a certificate, a pin, or a tote bag. It could also include having an appreciation dinner or fun day for the volunteers. Some other unusual ideas include paying for volunteers to receive continuing education or to attend conferences or meetings that will provide training that will benefit both the volunteer and the organization. The above items are generally considered to be incentives and not compensation. Although most non-cash gifts are acceptable, it Is Important to remain at a relatively small value. The IRS guidelines for de minimis limits do not generally provide an exact dollar amount however they should be infrequent and of a minimal nature. Providing volunteer staff with a t-shirt, cap, or other items that indicate their position or identify them at events would also be considered acceptable and generally not compensation.
Cash and other cash like items are where the risk increases. This includes gift cards, gift certificates, and of course cash or checks that are paid to volunteers. The IRS allows for reimbursement of expenses of any amount, including mileage reimbursements at the IRS rate or less. Reimbursements of this nature are not considered taxable compensation. Any cash or other cash type gifts (gift cards, coupons, etc.) are always considered compensation. In addition, larger or unusual items that are not cash may also be considered compensation. For example, giving a volunteer a car or their groceries every week would likely be considered compensation. These amounts must then have FICA taken out (if more than $100), the employer matching portion paid out, and must be included in the individual’s taxable compensation. In addition, the volunteer will also lose their protections as provided under the Volunteer Protection Act.
How do you thank your volunteers for their very hard work?
The easiest and best thing to do Is use two very important and big words often. Say Thank You! Many people volunteer because they want to make their community, city and world a better place. A simple thank you will go very far for those people. Of course you can also have a lot of fun with other simple ways to thank people. Some fun volunteer appreciation Items include very small tokens such as a certificate of appreciation, a small bag of chocolates, or chocolate coins. There are many more ideas available at http://www.energizeinc.com/ideas/gift.html. Using some fun inexpensive ways to thank your volunteers can help you stay compliant with IRS Guidelines, keep costs down and still show your volunteers they matter.