Are you supposed to take out taxes when providing pay to two board members and/or committee members for their services like creating a strategic plan, painting a ceiling, committee meetings, etc.?  How would you recommend tax free reimbursement for their services?

The question asked presents three different interpretations and applications of the rules and regulations as cited in Code Secs. 3121(d)(1), 3306(i) and 3401(c); Reg 31.3121(d)-1(b), 31.3306(i)-1(e), and 31.3401(c)-1(f).

 

First of all and generally, a board or committee member merely performing services as a member such as attending and participating in Board meetings are not employees and fees received are not subject to withholding.

 

In addition, a board or committee member who performs some services of a minor or nominal nature (e.g., painting a ceiling), but without receiving or being entitled to any compensation in any form is also not an employee and amounts received (i.e., expense reimbursements) are not subject to withholding.  The character, frequency, duration, and relative importance of the services performed are to be considered in determining if they are of a minor or nominal nature.