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Can nonprofit board members be paid?

Nov 6, 2018 8:00:00 AM / by Adeline Englehart

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Can a nonprofit pay it’s board members? This is a tricky question that many nonprofits face when starting their organization. In short, you can probably compensate your Board of Directors. However, it is considered best practice by the IRS not to compensate board members for their board-specific duties. (So, if your secretary also happens to be amazing at web design, you can technically pay them as an independent contractor for the purpose of designing your website, but you can’t pay them just for being your secretary. However, this situation needs to be clearly outlined in your organization’s Conflict of Interest policy.)

It’s rare for board members of nonprofit organizations to be paid because nonprofits are formed to serve the public good, and should be driven by mission, not money. Board compensation can call into question a nonprofit’s financial integrity, and their commitment to serving the public and fulfilling their mission.

However, there are certain scenarios where it is okay to compensate your board members. Before doing so, there are some major things that you need to be aware of to ensure that your organization is remaining compliant with IRS regulations. Here are the 3 major things to keep in mind before you consider paying your board members:

  1. If board members are compensated $600 or more per year, your organization must issue them an IRS Form 1099 MISC that they will need to file at the end of the tax year.
  2. Compensation limits or requirements can be put into place per your organization’s bylaws. If this is the case, then the bylaws must be respected.
  3. Some states have laws prohibiting nonprofit organizations from compensating their board of directors. Be aware of your state laws before coming to a decision.

Depending on your organization, compensating your board members might be the right choice. Our advice is to do your research prior to agreeing on compensation so you can guarantee that your organization is staying compliant and acting as a model nonprofit organization.