Thursday, March 23, 2023

Consider the tax, financial implications of joining a board

Consider The Tax, Financial Implications Of Joining A Board

If there’s a cause or activity you’re passionate about, agreeing to serve on the board of an organization that supports your particular interest may be a good idea.

For example, if your family is active in leagues and youth sports, you may want to have more say in running a program. If a loved one has died of a particular illness, you may want to serve on a board that supports research and care for that illness. Colleges, hospitals, churches and other nonprofits need the support of board members to continue operating, and there’s probably an organization out there that could use your help.

Being a board member can bring some benefits that are often not considered. First, you’ll have the opportunity to form lasting friendships with people who share your interests. Imagine meeting people who are also concerned about the environment, social justice, the arts in schools or animal welfare. Wouldn’t it be refreshing to spend time with people who want to educate the world about a particular medical condition or social problem? Board members can work side by side for a common goal.

In addition, you may be able to use talents that you may not be able to use in other aspects of your life. For example, although I am an accountant, I decided not to serve as a cashier long ago. (I deal with numbers all day!) Instead, I like to plan parties and talk to donors about gift planning, so I’m clear and clear that these are my interests before joining the board.

Before you decide to jump in and invest your time and expertise, there are financial and tax consequences to becoming a board member that must be considered before accepting a position.

minimum donation

First, you will probably be asked to make a minimum donation, which can range from a few hundred to tens of thousands of dollars. Make sure you know the minimum donation amount and have the resources to make at least the minimum gift possible without hurting your finances.

potential liability

There are some potential financial obligations to serve on the board. Not to scare you, but even if a charity doesn’t have to pay income tax, nonprofits still have payroll taxes to pay. Like any employer, if the charity doesn’t pay, the IRS can go after the individual officers, directors or check signers responsible for paying the tax. Also, ask your insurance broker to review the organization’s commercial insurance policy and make sure they have coverage for board members called directors and officers (D&O) insurance.


You probably won’t be paid for your time. If you want to make sure that individuals will not take advantage of your free labor and that your time will go to a financially sound, well-run nonprofit, go online and search for Form 990 of the organization. This is public information that will provide you with a picture of a charity’s finances and the compensation of key individuals. If Form 990 is not available online, ask for a copy from the organization’s executive director and ensure that it was filed with the IRS.

Your time is valuable, so make sure you can donate the time to the organization. The charity should be able to provide you with a meeting schedule and estimated time that is needed to determine if you are not too busy to serve. If you don’t have much free time right now, it might be good to join in later when you have less running time or when you retire. (I have a list of boards I’d like to join if I ever retire.)

If you want to serve on the board to market your business or to advance your career, there are better ways to spend your time accomplishing those goals.

Unfortunately, you cannot write off the time you donate. However, you may be able to write off your contributions to the organization and a number of expenses related to your volunteerism.

tax deduction

The mileage to and from board meetings and events can be deducted at 14 cents per mile. Materials, such as bats donated to a minor league team, uniforms you wouldn’t normally wear on the street, office supplies, and other non-cash items, such as food to feed the homeless, and expenses you may not have. The cost may also be deductible. You pay on behalf of the donor (not your own) and travel to benefit the charity is often deductible.

Any charitable deduction of $250 or more requires official documentation from the charity. The charity’s written documentation should include a description of the nature of the services you perform and the related expenses you need to pay, a detailed list of out-of-pocket expenses incurred, and preferably copies of all receipts. The charity must also provide a description of the value of any goods or services provided and a good faith estimate in order to reimburse the volunteer.

The charitable deduction is generally only deductible if you look at your tax return. Review with your tax professional what you can deduct on your return, including tax law changes for 2022. Also, ask them about the benefits of “bunching” your charitable deduction.

There are over 1.5 million non-profit organizations in the United States, enough to cover almost any interest. If you think board membership might be a good idea, look at Facebook groups you belong to, activities you and your family already enjoy, and organizations you already attend regularly. contribute. If you have the resources and the organization is qualified, giving your time and energy to a nonprofit is highly recommended.

Michelle C. Harting, CPA, specializes in ABV, AEP, tax planning, trust administration and business valuation. It has three offices in Southern California.

Nation World News Desk
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