Understanding Payroll for Nonprofits in Oklahoma – Tax-Exempt Status, Stipends & Compliance

Nonprofits in Oklahoma operate under unique rules — and payroll is no exception. Just because your organization is tax-exempt doesn’t mean you’re exempt from the rules of payroll tax reporting, wage law compliance, and employee classification.

In this post, we’ll cover the payroll essentials every Oklahoma nonprofit needs to understand, including:

• IRS and Oklahoma tax filings for 501(c)(3)s
• Common wage law mistakes made by nonprofit boards
• The risks of using stipends instead of payroll
• When volunteers must actually be treated as employees
• How to stay compliant with CPA-led payroll support

Payroll for Nonprofits: What Tax-Exempt Status Really Means

Being a 501(c)(3) nonprofit means you’re exempt from federal income tax — but not from payroll taxes.

Your nonprofit still must:

• Withhold and remit Social Security and Medicare (FICA)
• Pay federal unemployment tax (FUTA) unless exempt under strict rules
• File IRS Form 941 quarterly
• File IRS Form 940 annually (unless fully exempt from FUTA)
• Register and file with the Oklahoma Tax Commission (OTC)
• File OESC unemployment reports

Even churches and faith-based organizations must comply with state payroll rules unless a specific exemption is granted.

Who Counts as an Employee at a Nonprofit?

Your executive director? Yes.
Your part-time admin assistant? Yes.
Your intern who gets a “stipend”? Probably yes.
Your “volunteer” who gets a $250/month gas card? Possibly yes.

The IRS and Department of Labor both look at control and compensation, not your nonprofit status. If someone is doing regular work and being compensated — even modestly — you likely have an employee relationship and must:

• Run payroll
• Withhold taxes
• Issue a W-2

Misclassification is one of the top reasons nonprofits get audited or fined in Oklahoma.

Stipends, Honorariums & Non-Cash Compensation: Beware the Trap

Many nonprofits try to “keep it simple” by issuing stipends, honorariums, or paying board members via checks without taxes.

But this can trigger:

• Penalties for failure to withhold federal and state income taxes
• Loss of exempt status if improper compensation is discovered
• Unemployment tax liability for years of unreported wages
• Personal liability for board members under trust fund recovery penalties

If you’re paying anyone anything — even gas cards, gift cards, or monthly “stipends” — it’s time for a payroll review.

Can a Nonprofit Have Independent Contractors?

Yes — but only if:

• The worker meets the IRS’s criteria for independent status
• You don’t control their hours, tools, methods, or day-to-day activity
• You’re not paying them on a recurring schedule for core services

For example:

• A one-time website designer? Contractor
• A weekly grant writer or bookkeeper? Likely an employee
• A part-time youth program coordinator paid via 1099? Almost always misclassified

We can help you run a proper employee vs. contractor analysis and avoid misclassification fines.

Common Oklahoma Nonprofit Payroll Mistakes

1. Paying board members via checks without reporting to the IRS
2. Classifying part-time staff as “stipend recipients” instead of employees
3. Failing to file Form 941s or state unemployment returns
4. Skipping W-2 issuance at year-end
5. Thinking tax-exempt = exempt from payroll

How CPA-Led Payroll Helps Nonprofits Stay Compliant

We serve Oklahoma-based nonprofits including:

• Churches
• Community health centers
• Arts organizations
• Counseling clinics
• Animal shelters
• Education and literacy nonprofits

Our payroll services include:

• Payroll processing for employees and exempt staff
• Quarterly IRS and OTC payroll filings
• Certified W-2 and 1099 preparation
• Fringe benefit guidance
• Clergy housing allowance compliance (if applicable)
• Payroll audit support

See our CPA-backed payroll packages for Oklahoma nonprofits »

FAQs – Nonprofit Payroll in Oklahoma

Q: We’re a nonprofit. Do we have to pay unemployment tax?
Yes, unless you’ve filed for and received official exemption. Most 501(c)(3)s must file with the OESC.

Q: Can volunteers be paid stipends?
Only if the stipend is small and clearly reimburses expenses — not compensation. Otherwise, they must be classified as employees.

Q: Can our pastor or clergy be paid outside of payroll?
Only if their compensation meets specific IRS clergy housing rules. We help churches handle this properly.

Q: We issued checks to part-time staff but didn’t withhold taxes. What now?
You likely need to file back payroll returns and W-2s. We specialize in nonprofit payroll cleanup and correction.

Get Payroll Right Without Putting Your Mission at Risk

At Boulanger CPA, we help nonprofits stay focused on impact — while we take care of payroll compliance. From weekly pay runs to year-end filings, we manage the details so you can serve your community.

Schedule a Free Payroll Compliance Review for Your Nonprofit
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