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Volunteer Compensation Texas

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  • Volunteer Compensation Texas

    Anyone have any experience working with compensating volunteers?

    Situation: We are a nonprofit educational organization and as a result we rely heavily upon volunteer labor. Volunteers work in the office, kitchen, facility maintenance and teaching positions. Volunteers stay anywhere from a few days to several years. In return for their labor, all volunteers receive free meals at the campus cafeteria as well as receive free lodging in dorms, apartments or campus homes. We also operate 2 retail stores on campus (bookstore and clothing store) as well as a golf course.

    Question:
    1) Can a volunteer exchange their "labor" for free housing/meals without reporting this as taxable income? Do I have any reporting requirements for the value of meals and lodging a volunteer receives? I noticed on the 1099 MISC instructions about reporting taxable fringe benefits to nonemployees. http://www.irs.gov/pub/irs-pdf/i1099msc_07.pdf
    See page MISC-6. A couple of places I've read indicate the simple expectation of receiving meals and lodging can create an employer-employee relationship.

    2) Are we allowed to pay a nomial fee less than minimum wage to a volunteer for their work? (We are covered as an enterprise under FLSA) Volunteers do not travel for our organization nor do they incurr any expenses directly related to performing volunteer sevices. This nomial fee would simply pay for their own personal items such as cosmetics, clothing unrelated to volunteering, personal spending money etc.

    3) If a nomial fee is allowed, is this a W-2 or 1099 issue?

    4) In my limited research, it is my understanding we should stay away from using volunteers in our retail stores and golf course since these activities are being operated for a "common business purpose". Any comments regarding this?

  • #2
    This is actually more of a federal DOL issue. IRS does not care if you ever pay these people. HOWEVER, if any payment is made, and this would include "stuff", not just money, then IRS takes an interest because they want their cut.

    Federal DOL has rules (FLSA law) that says absent some very specific exceptions that all employees are paid at least minimum wage and overtime for all hours worked. So your main issue is whether or not federal (and state) DOL will allow you to avoid paying MW/OT. Then if you do pay something (not just cash), then IRS will have their hand out for taxes. Again, there are a few exceptions but these exceptions are not automatic. Volunteers is not really an IRS issue per se.

    http://www.dol.gov/elaws/esa/flsa/docs/volunteers.asp
    http://www.dol.gov/dol/allcfr/ESA/Ti...CFR553.103.htm
    http://www.dol.gov/dol/allcfr/ESA/Ti...CFR553.101.htm
    http://www.dol.gov/esa/whd/regs/compliance/whdfs13.pdf

    The problem with playing 1099 games is that IRS has to agree with you that the workers are not employees.
    http://www.irs.gov/businesses/small/...=99921,00.html

    -----

    IMO, you really need to talk to a local attorney. I know that I have read about court cases where the government did not agree with this sort of handling, but this is not the sort of thing I had much interest in and did not bother taking notes.
    "Reality is that which, when you stop believing in it, doesn't go away".
    Philip K. **** (1928-1982)

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