Does your nonprofit treat its executive director as an independent contractor?
Most, if not all, of the time this is not the correct classification for an executive director and the consequences of the misclassification could be devastating to your nonprofit.
Generally, executive directors are considered employees by the Internal Revenue Service as they are officers of the corporation. Executive directors run the organization, make decisions, and report to the board of directors. Thus, the IRS usually considers the executive director of an organization an employee, and misclassifying that person as an independent contractor could cause the organization and its board members to be held liable for unpaid employment taxes, plus interest and penalties.
As an employee, the organization should withhold income taxes and withhold and pay Social Security and Medicare taxes on wages paid to an executive director.
For more information on classifying workers as independent contractors or employees, visit here. For assistance in determining whether your workers are properly classified, contact Pro Bono Partnership of Atlanta.
Article: Worker Classification