Hi Carol,My homeschool group’s Board of Directors recently took up a collection from our members as a way of presenting me with an end-of-year gift of appreciation. This was a complete surprise to me, especially when they presented me with a check totaling over $700!
The Board collected donations from individual members and then wrote me a check on the group account. I’m unsure of how to deal with this tax-wise. The gift was given with the intent of paying my expenses for our state’s homeschool convention, including the leadership conference. If I returned the check and used the group’s debit card to pay my hotel expenses, would this alleviate the taxes?
Thank you for taking the time to answer. I want to make this as easy as possible for group record keeping, and I’m not sure if this is the correct way to go about it.
Barbie T, Florida
Gift or taxable compensation?
It is sometimes difficult to tell if cash is a gift or a payment for services. The difficulty in determining if payment to a worker is a gift or compensation is that you need to determine the intent of the donor. The IRS has a very difficult time determining intent or expectations. We, on the other hand, can usually determine if a payment is a gift because we know the donor and their expectations.
It sounds as if the co-op was collecting money to defray the expense of sending you to a homeschool convention. It is taxable income to you with expectation that you will “earn” it by going to the convention (and learning a lot!).
If you use the payment on co-op related expenses (like the convention), then you could claim those expenses on your tax return. At the end of the year you should report the $700 as income on your tax return and and then report expenses like the convention fee, mileage and hotel costs as deductions. You may break even or show a small profit.
A better way
In retrospect, it would have been better if the board had collected the monies and then gave you a nice note saying that you won an all expenses paid trip to the convention and used the co-op’s debit card to pay the expenses. These expenses would not be considered taxable income to you since the money never came to you. And the convention is to develop your leadership skills, not for your personal pleasure (although you may enjoy it!).
Paying Workers in a Homeschool Organization-2nd edition