Whether we volunteer to coach our child's soccer team, deliver groceries to those who cannot do it themselves or provide pro bono services in our professional capacity, many Canadians (12.7 million in 2013 according to Statistics Canada) gratuitously give their time to others. With over 1.96 billion hours (the equivalent of 1 million full-time jobs) volunteered, the contributions are incredible! However, as it seems with most aspects of life, it all comes back to tax. In this article we will discuss tax issues from the prospective of the volunteer as well as the recipient, such as a non-profit organization or charity.
Tax Issues for Volunteer
For most of us, what constitutes a volunteer appears pretty obvious - a person who does something for free (or with very little pay) and without obligation. But what if the volunteer receives some type of compensation? What if the volunteer driver, using his own vehicle, receives an allowance or reimbursement to cover some costs of operating the vehicle? These payments or benefits may complicate matters.
If a volunteer is reimbursed for expenses they incur carrying out their volunteer duties, the reimbursement is not taxable. In some cases, a volunteer of a registered charity may waive their right to be reimbursed for expenses and instead receive a donation receipt for tax purposes. That said, CRA encourages the exchange of cheques: the charity reimbursing the volunteer for expenses and the volunteer making a cash donation.
Reasonable allowances for costs incurred by an individual in carrying out their volunteer duties are not taxable (provided the associated costs are not also reimbursed). However, if the allowance is large enough to influence the voluntary position, the amount would generally be taxable as employment or business income. In contrast to waiving the right to be reimbursed, CRA's administrative policy does not allow a donation receipt to be issued for waiving the right to an allowance.
So, what is a reasonable allowance? CRA has stated that allowances paid to Federal Government employees for travel, as dictated by the National Joint Council, are reasonable. For example, for the period commencing January 1, 2020, for those in Alberta an allowance of $0.475/km for use of a personal vehicle would be reasonable (the rates vary across the country). Of course, other amounts could also be reasonable. It is prudent to maintain a record of how these amounts were...