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Nonprofit Law/Directors' expense reimbursement


QUESTION: I did see this topic addressed in 2012 but I was not fully satisfied with the response.  If I am an unpaid volunteer director of a non-profit, why am I considered an independent contractor and have to get a 1099 MISC as part of expense reimbursement?  

Do I then have to "create" an enterprise on schedule C (which would have no income of course) to use to report the expenses that in the first place resulted in the 1099 "income"?  And does that raise audit issues?  Travel expenses, perhaps even $thousands for a major conference, say, but NO income associated with that enterprise?  

I just don't see being a volunteer board member as having an independent contractor relationship with that entity.

Thanks in advance.

ANSWER: The IRS explains at on page 87. "A volunteer is an employee under common law if an entity has the right to direct and control the volunteer's performance, not only as to the results to be accomplished, but also as to the methods by which the results are accomplished."  But, on page 12 we see:
--- Start of Excerpt ---
All of the following are considered employees for purposes of working condition fringe benefits:  Reg. 1.132-1(b)
 Current employees
 Board of directors of the employer
 Independent contractors
Although not employees for most employment tax purposes, independent contractors are treated as employees for this purpose and are therefore eligible to receive nontaxable reimbursements as
working condition fringe benefits.
---End of Excerpt---

Therefore, you would be receiving a W-2 (as a employee) and not a 1099-Misc if, in fact, you received payments above allowed non-taxable reimbursements.  See page 41 of IRS Publication 535 at starting in the first column under the heading "Accountable Plans" which the organization must have if the payments are not to be taxable.  That section is written for employees but also applies to volunteers. See the section under "Volunteer Officers/Workers" at which is written specifically for Exempt Organizations and refers
to that Publication 535.

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.

---------- FOLLOW-UP ----------

QUESTION: Thanks so much. So -- to put it very concretely.  I serve on BOT of a non-profit California Hospital. They have made available an education conference in a nice location.  I anticipate I will have expenses of about $2000. They have already sent me a 1099 to fill out and said that reimbursed expenses will later be reported to me as 1099 MISC income.  

I do not work for this hospital and have no employment relationship with it.  Should I suggest to them that this is most appropriately handled as an "employee expense reimbursement" -- in the same way they would indeed reimburse an employee for such costs -- rather than a more complicated 1099 situation requiring me to both both the expenses and the income that represents the expense reimbursement, on some business entity that must be created to the shell for both things?

I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Nonetheless, I gave you some information about reimbursements.  But, as to your specific situation, I would not be giving advice in this forum. I would also need to gather more information.  If you want to hire me for a consultation, send me an email directly to my email address below and I will quote you my fees.

Harvey Mechanic
Attorney at Law  

Nonprofit Law

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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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