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Stipends to Family Child Care Association |
An increasing number of family child care associations are reimbursing their board members and officers for the costs of attending association meetings. What are the tax consequences of such payments?
Expenses of association officers or board members, paid by the association to reimburse the costs of attending association meetings are not taxable income to the member. Such out-of-pocket expenses may include:
Mileage payment (50 cents per mile is the 2010 federal standard mileage rate)
Bridge, ferry or road tolls
Parking expenses
Payments to a substitute so the provider can attend the meeting
The association should approve a written policy about payments of such expenses and include their policy with the official records of the association. The association should require the board member or officer to submit receipts or other records showing that such expenses were incurred. Such payments should not be shown as income on the individual’s tax return. The individual should keep a copy of their receipts or records as well as records showing that the source of the payments was the association.
Direct payments by an association to a board member or officer to attend an association meeting are taxable income. An example would be if an association paid a stipend of $25 for its board members to attend board meetings. If an association paid a $25 stipend to board members and said that such payment could be applied to members’ parking and other expenses, such stipends would also be taxable because they were not reimbursements for specific expenses. Such stipends should be reported on the individual’s Schedule C as Other Income. The association must issue a Form 1099 Miscellaneous at the end of each year for each person it paid more than $600 in stipends.
The above rules apply in the same way whether the association is unincorporated or is a non-profit corporation.
This handout was produced by Think Small (www.thinksmall.org).
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