This is an excerpt from my new book, Paying Workers in a Homeschool Organization-2nd edition.
Compensation to board members is taxable income
I was recently reviewing the bylaws for a homeschool organization that stated,
Members of the Board of Directors may receive reasonable compensation for their services and may be reimbursed for actual expenses incurred in the maintenance of their duties.
A homeschool organization can compensate your board for their service, but compensation to board members is taxable income. If the board member is an officer (chair, vice chair, secretary, or treasurer) they must be paid as employees. Other board members who are not officers can be paid as independent contractors and given a Form 1099-MISC.
Did you catch that? If officers are compensated, the IRS laws* say they must be paid as employees. That means creating paychecks, paying payroll taxes (Social Security and Medicare), preparing W-2s and quarterly filings with the IRS and your state, and may mean unemployment and workers compensation taxes too!
Does your homeschool group really want to deal with payroll? It can become an excessive burden on a treasurer or expensive if your organization hires a bookkeeper or payroll service. If you do choose to compensate your board members, I highly recommend using a payroll service.
*“Exempt Organizations: Compensation of Officers” https://www.irs.gov/charities-non-profits/exempt-organizations-compensation-of-officers
I spent at lot of time doing research on this book so that homeschool leaders will know if they are paying their volunteers, board members, and workers legally and correctly.
I hope the book is helpful and lets you sleep at night not worrying about an IRS audit of your worker classification.
Carol Topp, CPA
Paying Workers in a Homeschool Organization-2nd edition