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Thread: Non-Profit Director with no contract New Mexico

  1. #1
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    Default Non-Profit Director with no contract New Mexico

    Hello Everyone,

    I am hoping someone may have experience or be able to help me with this situation:

    I have been helping as the director of a non-profit and have been working for almost a year. The board decided to treat this as contract labor (1099) and has been paying as such:

    $10 an hour, payed once per month, based upon the hours that I report. I write the check to myself (from their account). I started doing this because the board was not responding to my questions about how I would get paid, so the president told me to just go for it.

    I just realized that I may need to start being classified as an employee. There is tax issues.. etc. (self employment tax, federal witholdings, etc.). This also would date back to the previous directors before me, for many years they have been treating what I would think are employees as contractors.

    Am I wrong to think that we have been taken advantage of(myself and previous directors)? I am going to have to pay self employment tax, as well as state gross receipts tax on the "contract labor".


    The other thing is that I dont have a contract. I asked for one about a month or two into the job and the board never got back to me. I asked for stuff like, what happens if I am terminated or resign, when can I get performance evals, etc. It is kind of like the board does not want to do anything or be involved. But they also want me to go through them for any/all decisions and nothing will get done.

    Would I be in any sort of legal situation if I decided to just quit working? Are they in any situation legally If I actually wanted to push anything?

    I like the work we do and some of the board members, it is decent part time income on the side (other than the tax issue, I will see how that works out come time), but I am worried this could become a mess and I need to know what could happen If I want out.

    Thanks in advance

  2. #2
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    How many hours a week do you work?
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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    What duties do you perform for them specifically and in what way? Do they provide you an office or place to work, computer, etc.? Do you consult or manage any other non profits? Are you required to work a certain number of hours, or given a regular schedule of any kind?

    On it's face, it does not sound likely that a director of a non-profit paid only $10 an hour could legally be paid as an independent contractor, but we would need more information to be sure.

    If you and your predecessors are, in fact, employees, yes they could be in serious trouble.

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    recently I have been working 10 hrs per week. (2 hrs per night after my full time job). When I first started I was 16 hours per week. Recently I was given an assistant who also works about the same hours, who the board also decided was to be paid 1099.

    I work from home, but they pay all expenses. For example I have a printer they bought, all the paper and envelopes, stamps

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    Quote Originally Posted by ferretrick View Post
    What duties do you perform for them specifically and in what way? Do they provide you an office or place to work, computer, etc.? Do you consult or manage any other non profits? Are you required to work a certain number of hours, or given a regular schedule of any kind?

    On it's face, it does not sound likely that a director of a non-profit paid only $10 an hour could legally be paid as an independent contractor, but we would need more information to be sure.

    If you and your predecessors are, in fact, employees, yes they could be in serious trouble.

    -I respond to questions (emails) from our members. I mail invoices members to remind them it is time to renew, and take payments. I keep track of who are members, who is about to expire. I also set up locations for training events that we have, things like calling around to get meeting rooms. I also prepare financial statements from the board to review at the monthly meetings they have. I help guide the direction of where I think they should go as an organization.

    -I don't work for any other non-profits or do any contract work for anyone. I do have a full time job during the week at a regular business


    Recently though, after I brought this situation to their attention I feel that I may need to go separate ways with the association. I don't want to be involved with anything shady that they may be doing/ or may have been doing in the past and as the "director" I don't want any of that to fall on myself, which Is why I am asking, without a contract am I free to go so to speak, just tell them I am resigning.

    I am just concerned about the legal side as I know one of the board members has some high profile lawyer friends.

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    High profile lawyers aren't going to get around basic wage and hour law. It is still somewhat questionable that you are an employee. The title would tend to make one believe that you are but the number of hours and the fact that you have only ceremonial or peripheral duties, and spend so few hours on this would make me question the title "Director". You don't appear to be directing anything. From your description, it sounds like typical volunteer duties, and volunteers are permitted in the non-profit sector. It is also permissible to pay some expenses and a stipend or honorarium to a volunteer. I have not heard of paying a set hourly rate. You can always call the DOL and ask their opinion; theirs is the only one that counts anyway.
    I post with the full knowledge and support of my employer, though the opinions rendered are my own and not necessarily representative of their position. In other words, I'm a free agent.

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    Quote Originally Posted by rivert View Post
    ...which Is why I am asking, without a contract am I free to go so to speak, just tell them I am resigning.

    I am just concerned about the legal side as I know one of the board members has some high profile lawyer friends.
    Of course you are free to leave. You have no contract and even if you did I doubt very seriously that it would require you to continue to work for them. It might stop you from being affiliated with another competing organization.
    Last edited by Payroll Guy; 01-11-2017 at 06:37 AM.

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    "Shady" might be stretching it. Even if they are paying you erroneously as a contractor, that's, frankly not that uncommon among non-profits. Lots of them are run by volunteers or mostly volunteers who may know everything about the organization's purpose, but very little about their legal responsibilities. And they are usually operating on a shoe string budget, so they try to avoid the expenses of FICA match and hiring a payroll processor.

    In any case, from your perspective, I can't see where the minimal compensation is worth your time when you factor in the additional tax burden. Assuming you are in the 25% federal income tax bracket, and factoring in the self employment tax, etc. you are probably making about $50/week or less. If you care about the organization, I would honestly tell them to just skip the compensation and let you be a volunteer. If you don't, I would give them your resignation.

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    Quote Originally Posted by ferretrick View Post
    "Shady" might be stretching it. Even if they are paying you erroneously as a contractor, that's, frankly not that uncommon among non-profits. Lots of them are run by volunteers or mostly volunteers who may know everything about the organization's purpose, but very little about their legal responsibilities. And they are usually operating on a shoe string budget, so they try to avoid the expenses of FICA match and hiring a payroll processor.

    In any case, from your perspective, I can't see where the minimal compensation is worth your time when you factor in the additional tax burden. Assuming you are in the 25% federal income tax bracket, and factoring in the self employment tax, etc. you are probably making about $50/week or less. If you care about the organization, I would honestly tell them to just skip the compensation and let you be a volunteer. If you don't, I would give them your resignation.

    You have a very good point. I did not think about it that way, as far as the board having any clue about legal responsibilities. For what I make (like you had mentioned, after taxes, etc), It's too much of a head ache trying to get the point across when it comes to the legal requirements. I probably would feel better about the whole thing just volunteering.

    I guess now what It comes down to, if I were to agree to be a contractor instead of employee does that even matter as far as IRS purposes? Could they make them pay back taxes regardless if I agree to be a contractor?

    In any of you all's honest opinion am I a contractor or employee?


    I really appreciate the input, it had been quite a stressful situation lately. Really feel better knowing I could leave If I needed too.

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    Based on the information you provided in post 5, I would say that you are an employee. (And I have a looooooong employment history working with contractor vs employee issues.)

    The legality of your classification (i.e., employee or contractor) has nothing to do with what you agree to be - your classification is not up to you, or the organization, it's entirely up to the IRS and the DOL. And according to their rules, you are (probably) an employee.

    If the organization re-classifies you now as an employee, the IRS may or may not go after it for back withholdings - there's a 50-50 chance of this. If you file a formal request with the IRS and/or the DOL to be re-classified, the IRS will go after the organization for back taxes.

    Regarding leaving, if you don't have a contract, you may leave anytime you wish, even without notice.

    Regarding doing this work on a volunteer basis, this would only be legal if your organization is legally designated as a charitable non-profit. If it's a non-profit non-charitable organization, then I believe it's legally obliged to pay you at least minimum wage for the work you do.

    And I agree with the others, I don't think this is necessarily a shady organization. I think it's just clueless.
    Last edited by eerelations; 01-12-2017 at 05:28 AM.

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    Quote Originally Posted by eerelations View Post
    Based on the information you provided in post 5, I would say that you are an employee. (And I have a looooooong employment history working with contractor vs employee issues.)

    The legality of your classification (i.e., employee or contractor) has nothing to do with what you agree to be - your classification is not up to you, or the organization, it's entirely up to the IRS and the DOL. And according to their rules, you are (probably) an employee.

    If the organization re-classifies you now as an employee, the IRS may or may not go after it for back withholdings - there's a 50-50 chance of this. If you file a formal request with the IRS and/or the DOL to be re-classified, the IRS will go after the organization for back taxes.

    Regarding leaving, if you don't have a contract, you may leave anytime you wish, even without notice.

    Regarding doing this work on a volunteer basis, this would only be legal if your organization is legally designated as a charitable non-profit. If it's a non-profit non-charitable organization, then I believe it's legally obliged to pay you at least minimum wage for the work you do.

    And I agree with the others, I don't think this is necessarily a shady organization. I think it's just clueless.
    Again, thanks for the help. I told them I wont be working any more unless they will pay me something that I feel is fair. I essentially said fine, if you will be treating me as a 1099 then I will treat you as a client. Either take the price for my services or leave it and find someone else to do it.

    I want to make sure that anyone else they choose is notified of the ramifications, because I have a feeling they will try to hire another newbie like myself and I don't want anyone to go through the same thing. Can I notify whoever they choose next and post on reviews about my past experience with them as an employer? Or would you suggest to stay away from that?
    I want to give them the benefit of the doubt, like you said as being "clueless" but I cant get over the fact that everyone on the volunteer board owns their own succesful businesses, this is a trade organization.

    The other thing is that they still need to file 1099's (for me, and others throughout the year) and a 990t. I feel somewhat bad for leaving them hanging... could/would any of that fall on me if they don't file in time? as the not-so "executive director". (I feel like you cant really give that title to a contractor).

    That begs the question, can you hire an independent contractor to run your business for you? Or would that, by definition, be an employee?
    Last edited by rivert; 01-18-2017 at 05:26 PM.

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    As I said before, this is probably (more than likely) an employee position. It's not the title that makes it so, but the nature of the work.

    You are legally free to tell your replacement and others about their possible (likely) misclassifications. However, I would be leery about posting reviews because if you're not extremely careful about the wording of said reviews, you may be opening yourself up to a potential defamation lawsuit. I recommend staying away from the review thing.

    Regarding their cluelessness, please note that most (like 90%+) of the employers I've worked for and with, as an employee and as an independent contractor, ran successful businesses (and sometimes large too, think 14,000 employees), and yet were still completely clueless about employment law.

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    Agreed with the other answers. Sometimes the best/only solution to a bad employer is to find a good employer. IRS is very clear that small non-profits are clueless. IRS mostly does not care until/unless they see recovery dollars on the table. IRS care about THEIR money, not yours.
    "Reality is that which, when you stop believing in it, doesn't go away".
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    Quote Originally Posted by DAW View Post
    Agreed with the other answers. Sometimes the best/only solution to a bad employer is to find a good employer. IRS is very clear that small non-profits are clueless. IRS mostly does not care until/unless they see recovery dollars on the table. IRS care about THEIR money, not yours.
    And your opinion's on the filings I mentioned? If I don't do it for them I have a feeling no one will, in time at least (1099's and 990t).

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    Do your job to the best of your ability. I have no idea if you are a "legally responsible person" (LRP) or not (hint - you do not want to be). I have no idea if you have a boss or not. Direct this question to them. But you are (probably) not the company. You are you. Yes the company needs to do a great many things, but unless you have gone out of your way to become a "legally responsible person", then it is the company's issue, not yours. Do you sign checks? Do you decide what gets paid for? Could you close the organization if you wanted to? Is the CEO of the Ford Foundation terrified that you are going after their job? Or are you just a poorly paid part time worker who answers phones and opens mail?

    I do accounting for my church but I am not the decision maker and am not a "legally responsible person". I was in charge of all disbursements for a large software company you have all heard of, but I still had bosses and was never a LRP.
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    You have been there almost a year. Who issued the 2015 1099s last year? Was it your predecessor or someone else? That might give you a hint if someone else is already handling them.

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    Quote Originally Posted by DAW View Post
    Do your job to the best of your ability. I have no idea if you are a "legally responsible person" (LRP) or not (hint - you do not want to be). I have no idea if you have a boss or not. Direct this question to them. But you are (probably) not the company. You are you. Yes the company needs to do a great many things, but unless you have gone out of your way to become a "legally responsible person", then it is the company's issue, not yours. Do you sign checks? Do you decide what gets paid for? Could you close the organization if you wanted to? Is the CEO of the Ford Foundation terrified that you are going after their job? Or are you just a poorly paid part time worker who answers phones and opens mail?

    I do accounting for my church but I am not the decision maker and am not a "legally responsible person". I was in charge of all disbursements for a large software company you have all heard of, but I still had bosses and was never a LRP.
    I am the only employee (contractor, whatever). I am the only person that does any work at all - beside going to a once a board meeting to chat and drink coffee like the others. My "Boss" is the board of directors. I would like to quit right now, I just don't know If i can without filing all the tax forms for them. If I don't do it for them, I have a feeling no one will. Does that help determine if I am legally responsible person?

    I am a signer on our bank account, but I am not on the board.

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    You are either an employee or contractor. You aren't the entity and if you want to quit it will be up to the board to do any tax related things that must be done or hire someone else to do it.

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    You are not required by any laws in the US to stay on and on ad nauseum to do their tax filings for them just because they're too clueless to hire someone else to do it for them. You are not personally responsible for their tax filings. If they don't somehow get them done, that's their problem, not yours. You are legally free to get up from your desk right this minute and walk out the door, never to return. I don't know how else to say this to you, so I hope you understand it this time.

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    Quote Originally Posted by Payroll Guy View Post
    You are either an employee or contractor.
    Given the information provided by the OP in post 5, and the fact that OP has an assistant reporting to him, I am 99% sure he is an employee who's been misclassified as an IC. However, I agree that whatever he is doesn't change the fact he is legally free to quit anytime he wishes to.

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    I probably should have written "It doesn't matter if you are an employee or a contractor..."

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