Hi,
Most board members think the nonprofit shields them personally. It mostly does – until payroll taxes go unpaid, and then the IRS skips the organization entirely and comes straight for your house, your savings, your personal accounts.
When you join a board this liability does not require you to have done anything wrong yourself. If any of this describes your organization, the board is exposed:
- The nonprofit is behind on payroll taxes, or paying vendors and staff while deposits slip
- You are an officer, treasurer, or board member with any authority over the finances – even as an unpaid volunteer
- The board approves what it is handed without really seeing whether taxes are being remitted
- Cash is tight, and “we’ll catch up with the IRS next month” has been said out loud
Here is how the liability actually works:
- The IRS can assess the Trust Fund Recovery Penalty – 100% of the unpaid payroll taxes – personally against any “responsible person”
- A responsible person is not just paid staff. Volunteer board members count if they had the authority and knowledge, and IRS rules name directors specifically
- “Willful” sounds criminal but isn’t – it just means the taxes went unpaid while other bills got paid first. No bad intent required
- Multiple people can each be liable for the full amount, and the IRS regularly pursues board members directly
- Your D&O insurance usually will not cover it – unpaid taxes are commonly excluded, so people find the gap only after they are personally assessed
The cruel timing is that this surfaces exactly when the organization is struggling and can’t pay – which is precisely when the IRS turns to the individuals.
The fix isn’t complicated, it just has to be someone’s actual job: payroll taxes deposited on time every period, remittance verified instead of assumed, and the board given enough visibility that “we’re behind with the IRS” can never be a surprise. That is the exposure we close – we keep the trust-fund taxes current and remitted, flag responsible-party risk before it turns personal, and make sure your board is never the last to know.
Reply to this email by Friday and we will set up a free 15-minute call with one of our senior nonprofit specialists to check whether your organization carries this exposure right now. Bring your last payroll tax filing, and we will tell you where your board actually stands.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com