Stipends: when paying a volunteer turns into pay

This guide is for small charities that want to give something back to hard-working volunteers: a monthly "stipend" for the person who runs the food pantry, a flat payment for a youth coach, gift cards for regular helpers. These gestures come from a good place, but money paid to a volunteer can change who they are in the eyes of the law and the IRS. After reading, you'll know the difference between reimbursing expenses and paying a stipend, when a stipend can turn a volunteer into an employee, what tax paperwork may follow, how a stipend can affect a volunteer's legal protection, and safer ways to say thank you.

This guide covers volunteers who do the charity's work. For paying board members, see the stipends section of our guide to paying people fairly.

Reimbursement is not a stipend

Two kinds of payment look alike but are treated very differently:

• A reimbursement pays a volunteer back for real costs they had while volunteering, such as mileage or supplies, backed by receipts or a log. Done properly, it isn't pay. Our volunteer expenses guide explains how to set it up.
• A stipend is a set amount paid whether or not the volunteer spent that much, such as $100 a month, or $20 a shift. It isn't tied to real costs, so it starts to look like pay for their time.

If a payment covers costs, document it as a reimbursement. If it's a thank-you for time, treat it as a stipend, and read on.

When a volunteer becomes an employee

Federal wage law, the Fair Labor Standards Act (FLSA), protects employees with rules like the minimum wage. The U.S. Department of Labor says people may volunteer for charities "without contemplation or receipt of compensation," and that volunteers usually don't displace paid staff or do work that would otherwise be done by employees.

A stipend can blur that line. If a "volunteer" gets regular payments tied to the hours they work, does a job you'd otherwise hire for, and expects the money, they may really be an employee. Then the minimum wage, overtime, payroll taxes and workers' compensation may all apply, and calling them a volunteer doesn't change it.

Two situations need special care:

• Your own staff. The Department of Labor says "paid employees of a non-profit organization cannot volunteer to provide the same type of services" they're paid for. A part-time employee can't "volunteer" extra hours doing their usual job.
• Commercial activities. The Department of Labor says people generally may not volunteer in a charity's commercial activities, such as a gift shop. Volunteers at a thrift shop or café may need a closer look.

Our employee or contractor guide explains how to tell employees, contractors and volunteers apart.

Taxes and forms

A stipend is usually income to the volunteer. An IRS article for volunteers says that "stipends, education awards, bonuses and allowances" received for volunteering "may be considered taxable income," and that volunteers will generally get a Form W-2 or a Form 1099 if the payment is taxable. Some federal programs have special rules: for example, IRS Publication 525 says amounts that volunteers in National Senior Service Corps programs receive for supportive services or out-of-pocket expenses aren't income.

What that means for your charity:

• If the person is really an employee, pay them through payroll, withhold taxes and give them a Form W-2. Our hiring your first employee guide walks through payroll.
• If you treat the stipend as payment to a non-employee, the IRS says you report payments to a non-employee for services on Form 1099-NEC once they total $600 in a year, or $2,000 for payments made after December 31, 2025.

Keep a record of every stipend: who, how much, when and why.

The Volunteer Protection Act's $500 line

The federal Volunteer Protection Act gives volunteers some protection from personal liability for harm caused while volunteering, with limits. Our insurance basics guide explains what it does and doesn't cover.

The Act's definition matters here. It defines a volunteer as someone who does not receive compensation, "other than reasonable reimbursement or allowance for expenses actually incurred," or "any other thing of value in lieu of compensation, in excess of $500 per year." Read that carefully: the $500 figure applies to things of value given "in lieu of compensation," such as gifts or perks. Compensation itself, other than reasonable expense reimbursement, has no dollar threshold in the definition. So a stipend that works as pay could take a volunteer outside the Act's protection even below $500 a year, and perks worth more than $500 in a year can too. Reimbursing real expenses doesn't count against either.

Safer ways to say thank you

Most volunteers want to feel valued, not paid. Ways to thank them that don't look like wages:

• Reimburse real costs promptly, with a simple form.
• Say thank you in public: a shout-out in the newsletter or at an event, with permission.
• Offer training and growth: a course, a conference place, a reference letter.
• Celebrate together: a volunteer dinner or a small yearly gift that isn't tied to hours.
• Write a personal note. Our volunteer management guide has more ideas for keeping volunteers happy.

Before you start a stipend program

1. Write down why. What is the payment for: costs, time, or something else?
2. Check whether it's really a reimbursement. If so, use receipts or a log instead.
3. Ask whether the person may really be an employee. Hours, regularity and the kind of work all matter.
4. Decide how you'll handle tax forms, and keep records.
5. Check the Volunteer Protection Act: whether the stipend counts as compensation, and the $500 line for perks. Check your insurance too.
6. Get the board's approval, in writing, and get advice if you're unsure.

Your stipend checklist

• We reimburse real expenses with receipts or a log, separately from any stipend
• We've asked whether anyone paid a stipend is really doing a job we'd otherwise hire for
• No paid employee "volunteers" to do their own paid job
• We know which tax forms apply to any stipends we pay
• We've checked whether our stipends could count as compensation under the Volunteer Protection Act, and track perks against its $500 line
• The board approved our stipend policy in writing
• We got advice before starting a stipend program