Question: Cash gifts to teachers from PTO

Our school historically has given teachers a cash gift of $25 on the first day of school. An administrator wants to get rid of this tradition & replace it with teachers turning in receipts to get the $25, citing IRS regs. Can a PTO give cash to teachers tax-free?

Asked by Anonymous

Answers:

Advice from PTO Today

Craig writes:
It's OK to give teachers the money, but you should ask for receipts for your records. Your tradition is a nice way to show teachers that you're on their side. It gives them flexibility in spending the money, and because you give it to them upfront, they don't have to lay out money from their own pockets then seek reimbursement. Your concern in collecting receipts is to protect your nonprofit status. The IRS wants to see that you're spending your money in a way that matches your mission. For a program like this, where you're giving money directly to individuals, you want to document that it's being spent for the school and not on personal expenses. The IRS tells us you won't be in trouble if you don't collect every single receipt. They're more concerned whether you're spending a significant portion of your overall budget in ways that don't meet your mission. If you do continue your program as is, I'd recommend telling teachers they must turn in receipts, with the penalty being that they won't be eligible for future grants like this if they don't.