The 501 S(c)ene

The latest view on not-for-profit accounting issues

Can Gift Cards Jeopardize Your Volunteer Force?

If you are an organization that relies heavily on volunteers, you likely struggle to find ways to say “Thank You” to those who give of their time, especially those few stellar volunteers who have either been with your organization for a long time, or who have spent extraordinary amounts of time serving your cause. While the free t-shirt or occasional lunch is nice, many organizations want to do more and have found that the “Thank You” plaques just aren’t quite as meaningful. So they turn to gift cards, because it isn’t cash, and the recipient can spend it however they want.

WARNING! Doing so is actually a taxable event to the recipient, and they could now qualify as a paid employee subject to employment taxes, withholdings, and issuance of a Form W-2. In the eyes of the IRS, gift cards (in any amount) are cash equivalents, which is the same as compensation.  And if your organization relies on the volunteer labor force to keep certain income (such as that from your thrift store) from being subject to UBIT, you may jeopardize that exemption.

Katie L. Thomas, CPA

Comments

  1. Aaron Harris says:

    Clearly, I missed the original post. That being said, I think this blog should have provided more context as far as what the IRS considers taxable. Does the IRS really expect an organization to issue a Form W-2 for a $10 gift card? What is the minimum threshold they consider? Or does it depend on the frequency of the activity?

    • admin says:

      Aaron –

      The IRS expects any income to be reported to them, so I am not aware of a minimum. That being said, a one-time gift card of $10 would probably not be an issue. Also, just so it’s clear, you wouldn’t need to issue a separate Form W-2. Any amounts like this would be included on the employee’s Form W-2 for the year. Thank you for your interest in our blog.

      Colette Kamps, CPA