Discussion:Not for profit gives gift cards to its volunteers
From TaxAlmanac
Discussion Forum Index --> Advanced Tax Questions --> Not for profit gives gift cards to its volunteers
Discussion Forum Index --> Tax Questions --> Not for profit gives gift cards to its volunteers
| 18 June 2008 | |
| does this require the not for profit to treat the volunteers as employees if they are given a gift card in apprecitation of their work? any reg to support this | |
| 18 June 2008 | |
| What is the dollar value of the gift cards?
Are they doing the work in anticipation of the gift card? Is the gift card just a nominal way of saying thank you? | |
WD Kebschull (talk|edits) said: | 18 June 2008 |
| I think I know what you are talking about. But I am not sure that the gift cards were purchased by the non-profit orginazation.
$10 No. Yes. Besides, it is likely that the volunteers spent way more than $10 on their volunteer activity for which they were not reimbursed. Cheers, WDK | |
| 18 June 2008 | |
| no they are doing the work because they want to and the gift cards are in appreciation. Yes the gift cards are purchsed by the non-profit organization. So what if they sent more than $10 of their time how does that calculate in the equation
Neil | |
WD Kebschull (talk|edits) said: | 18 June 2008 |
| Blrgcpa:
Done Nshnider: I was speaking of out of pocket expenses which were not reimbursed not time. WDK | |
| June 19, 2008 | |
| Neil, how much are we talking about here? And is this a regular thing? Obviously the answer is different if it's $100 each week for months to the same people vs. $50 as a one-time appreciation gift. | |
| June 20, 2008 | |
| I did it again Fred, didn't I? Well, it doesn't hurt to ask again.
Pegoo, you need to check out the "R" discussion and bring your wagon with you. We'll need it for the costumes. | |
| 20 June 2008 | |
| I'm trying to keep these real question discussions on track, but Pegoo, you should see the outfit that Nats is going to be wearing. Can you give me a Holy Moly? | |
| 21 June 2008 | |
| this gift card is not regular but just given to volunteers ocassionally in appreciation for their service to the church. Gift cards could be as high as $50
Neil | |
| June 21, 2008 | |
| Neil, I don't think there's an issue here with giving the volunteers a $50 gift card occasionally. And the amount isn't high enough to start worrying about whether a 1099 would apply either. | |
| June 21, 2008 | |
| I'm not seeing any colorable argument that would support the recipients excluding this, though, of course, nobody is likely to get very excited about it. | |
| 21 June 2008 | |
| I tend to agree with LH2004 here. A gift card is a cash equivalent and it is given to the volunteers because they performed services for or on behalf of the organization. That is taxable compensation to the volunteers. I also agree that nobody is likely to get excited about it, but why should the organization put itself in an awkward position?
Another issue to be aware of is the "automatic excess benefit transactions" under section 4958. If there is no written contemporaneous substantiation that the gift card is intended to be compensation, then it is considered an automatic excess benefit to the volunteer and is technically subject to intermediate sanctions. http://www.irs.gov/pub/irs-tege/eotopice04.pdf From an article by a CPA on ezinearticles: "From time to time, some 501(c)(3)s may provide volunteers with awards, or gifts. In general, if these are non-cash items of nominal value, such as a ham around the holidays, your organization should not count these items as taxable wages. If your 501(c)(3) gives volunteers cash items, such as gift certificates or any other taxable fringe benefit, it must include these items in the volunteers taxable wages." Link to article: http://ezinearticles.com/?Non-Profit-Payroll&id=499360 Ideas for ways to recognize volunteers: http://www.energizeinc.com/ideas.html Giving gift cards to volunteers and failing to report them as taxable wages is clearly not a "best practice." | |
| June 22, 2008 | |
| CPAdavid, you only have to worry about an excess benefit transaction if the volunteers are disqualified persons within the meaning of sec. 4958(f)(1), that is, persons with substantial control, their family members and their 35%-owned entities, right? | |
| 22 June 2008 | |
| LH2004,
Yes, you are right. I applied it incorrectly to the volunteer. Thanks for catching my error and pointing it out in such a tactful manner. Private inurement and excess benefit transactions require the involvement of an "insider" or disqualified person. Private benefit transactions do not. | |
| June 22, 2008 | |
| I'm curious David. If you had a client that wanted to do this, would you tell them they had to report the gift cards as wages? I can see how volunteers might put in 50 hours/year or more and reporting a $50 gift card (or less) as wages just seems ridiculous. (I realize that just because some reporting requirement is ridiculous it doesn't mean it shouldn't be followed. I'm just wondering from a practical standpoint how you would handle it.) | |
| 22 June 2008 | |
| Natalie, I think I would simply tell the client what the correct tax treatment is (in writing) and suggest that they find another way to show appreciation to their volunteers. Ultimately it is the client's decision. If I were preparing and signing payroll tax returns though, I think I would insist that they not hand out gift cards without correct reporting.
I don't normally involve myself in bookkeeping or payroll tax filings, so I may not be the best person to take advice from in that regard. I will say that I don't have much patience with clients that don't take my advice on these types of issues, or that always want to skirt the law thinking that "no one will know." If they are ignorant and do it, that's one thing, but if they continue to do it after I've told them it is improper, I disassociate myself from them. It is really hard to make a "reasonable cause" argument for penalty relief if I know the client has deliberately and willfully ignored the correct treatment. | |
| 22 June 2008 | |
| I've found that if you have 10 volunteers, at least 5 will be a group of stout women, 3 very thin women, and a couple of fellars that have no idea what they're doing (well, generally, they're fellars hoping to "get some", but are long past their prime by the time they get around to gettin').
What works well to reward these people, on a percentage basis, is a buffet lunch. Here again, statistics apply. Oversalt that which is salted, over sugar that which is sugared, and heap food coloring on anything that it will help. Quantity over qaulity (like they do in the casinos). Give them a few days off after this, and then put them back to work. I've got a group of them so well trained over at Piney Woods (where I part-time preach) that they don't even ask to use the bathroom anymore. I never saw Jesus hand out no gift cards when he could get by with serving leftover fish and loaf bread. | |
