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Nonprofit Law/Deferred Salary for non-profit's only employee


I started a 501(c)(3) and I have tracked my hours and plan to get compensated for the hours I have put into the non-profit (the board has already approved this).  Money we raise now goes into scholarships for the students we are helping and creating a base for next year... once (if) we are ahead in funds - then, the hope is to get paid retroactively.  I work on the 501(c)(3) part-time and have another full-time job, so rather than take out a loan to pay me, our preference is to simply wait until the non-profit has received enough money to cover scholarships before I accept any deferred wages.  I know there are a lot of different laws in place to deter tax manipulations - however, in this case, I simply want to get paid for what I do - and don't care if that gets paid later.

From a legal standpoint, what are the requirements to defer this payment as described?

Meaning - say, for example that I worked for 100 hours in 2011 and 500 hours in 2012 getting the company running.  If we receive enough in donations to pay a salary in 2013 - what are the legal requirements and/or ramifications of compensating me for those 600 hours through a one time payment in 2013?

Thanks for any help you can provide.


I have in my profile that this free forum is only for general questions relating to IRS federal exemption issues of 501(c)(3) organizations. A 501(c)(3) organization may defer payments to an employee.  The IRS has written:
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Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions.
---End of Excerpt---

Whether your organization's situation involves "substantial limitations or restrictions" is something I would not yet know. I would be willing to work on your matter further, but I would need to spend a substantial amount of time in gathering information as to whether there are substantial limitations or restrictions and that would be beyond the scope of my offer of free services.  If you want to inquire about hiring me for such work, please contact me directly to the email address below.

Harvey Mechanic, Attorney at Law -

P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship.  

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Harvey Mechanic


I am an attorney and I volunteer time to answer general questions about U.S. Federal income tax issues of nonprofit 501(c)(3) public charities only. Those questions could be about establishing and maintaining legal requirements for such non-profit organizations in the United States, including Internal Revenue service filings and requirements. I will not be working on this free forum to answer questions about Nonprofit's possible unrelated or for-profit businesses or how to fill out forms. This forum is only for general questions about federal tax law, not as the law applies to your specific situation. If you do not make your question public then I will not be spending much of my donated time on answers that would not benefit the public. If you have other questions, please contact me at I will reply from my email. In any case, do not reveal confidential information to me until after I have contracted with you to provide personal legal services. My responses on this forum are intended to be general statements of law, should not be relied upon as legal advice, and do not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather extensive information about the situation. To search my previous answers you can do a Google search by "" without the quotes and then add your search terms before hitting enter.


I have been practicing law and especially the law of nonprofit organizations since 1990 when I was admitted to the New York Bar and I have maintained my status with the Bar since that time.


B.S. Columbia University in New York City, 1970

J.D. (Law Degree) Brooklyn Law School, 1990 -- Cum Laude.

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