How can I reward volunteers without putting my nonprofit status at risk?

Let’s face it; volunteers are one of the most vital assets to any nonprofit organization.  All organizations value their volunteers and want to retain these coveted assets.  Organizations need to be cautious about how they recognize and reward their volunteers so that they do not jeopardize their nonprofit status.

An appreciative board of directors or executive director may want give a “little something extra” to volunteers for their efforts; however, this action could turn this volunteer into an employee of the organization.  The nonprofit would have the same reporting and withholding requirements for this person as it would for any employee or independent contractor.

There are several things the nonprofit organization can do to recognize their volunteers.  Occasionally, nonprofits may provide their volunteers with awards, or gifts.  In general, these non-cash items need to be of nominal value.  Organizations should be aware that gift cards or other items that are readily convertible to cash are considered to be cash and would be subject to taxable withholdings.  Nonprofit organizations may also hold an event for volunteer appreciation or provide awards such as “Outstanding Volunteer(s) of the Year.”

It is important to recognize your volunteers so that they stay motivated and want to continue to support your organization.  Remember to think about the best way to recognize your volunteers so that you do not jeopardize the volunteer or your organization.  Salmon Sims Thomas specializes in accounting for nonprofit organizations. Please contact James Nash, CPA if you have any questions.