Carol,
How much of a discount can we give to our homeschool group leaders? We want to offer a good sized discount on the fees they pay since they put in so much time to running our group.
But I read that if we give significant benefits, it is taxable income to our hard-working volunteer leaders! We don’t want that.
So …what is “significant”? What dollar amount crosses that taxable income threshold? Or what percent discount can we give them? Is 20% too much?
Such good questions!
I agree that you should try to avoid giving “significant” discounts or other benefits to your leaders because it can be seen as taxable income to them.
The IRS is a bit cagey on what constitutes “significant” benefits like a discount of fees to a volunteer. They do seem to define in words, but not dollar thresholds or percentages what “insignificant” benefits are.
IRS Publication 3079 Chapter 2 states:
On the other hand, a worker who receives merely insignificant monetary or non-monetary benefits is considered a volunteer, not a compensated worker.
IRS Pub 3079 Chapter 2https://www.irs.gov/pub/irs-pdf/p3079.pdf
Determining whether a benefit is insignificant requires consideration not only of the value of the benefit but also:
The quantity and quality of the work performed,
The cost to the organization of providing the benefit,
The connection between the benefit received and the performance of services
Questions to evaluate “insignificant” benefits
So when you look at the discounts or other benefits you want to offer to volunteers ask yourself these questions:
- What is the value of the benefit? Does it have a specific dollar amount? Or is it intangible like priority registration? The more a benefit is a specific dollar amount, and of course the higher the dollar amount, the more likely it is to be “significant” and therefore taxable income to the volunteer.
- How much time does the volunteer put in to receive this benefit? Some groups calculate the dollar per hour a volunteer is receiving. It’s usually far below minimum wage, usually only $1 to $2 per hour, clearly insignificant in light of the quantity of time put in.
- What does it cost your organization to offer this benefit? Intangible benefits like priority registration, close parking spaces, etc. cost nothing, therefore making them “insignificant.”
- How close is the connection between the volunteer work and the benefit? If you track volunteer hours and discount fees based on hours worked, it could look like taxable compensation. But if instead all volunteer leaders get a set discount at the start of the semester regardless of time put in, it looks “insignificant.”
Tips
- Keep your fee waivers to board members small and insignificant. The IRS does state that insignificant benefits to volunteers is not taxable income.
- Consider showing appreciation with non-cash gifts such as food (cater food for board meetings), flowers, early registration for classes, or reserved parking spaces. Buy resources to make their jobs easier including tickets to a leader training conference, HomeschoolCPA’s webinars and books, hiring a payroll company (your treasurer will love it!), accounting software, registration apps, etc.
- Have the amount of fee waivers decided by a separate, independent committee or put it to the vote of the full membership. The board should not vote themselves a fee waiver. It’s a conflict of interest and self-serving.
Helpful webinar on Board Training
In these board training videos, we discuss “insignificant” benefits and even share a few examples to help you avoid offering significant benefits to your volunteer leaders.
The three-video set will to train your homeschool group’s board members. Many homeschool leaders have never served on a nonprofit board before so these videos explain the duties of a board, its structure, how to run a meeting, and more. For more details visit: Homeschool Board Training video set
Carol Topp, CPA
HomeschoolCPA.com