I run several very small businesses and a nonprofit. It is not my primary career and really just do it on the side for fun. We lose horrendous amounts of money actually, so it’s not even about a side hustle.

With that said, I’m working on the annual worker’s comp audit. Last year we had about 130 volunteers for the nonprofit. I know this is generally frowned upon, but at the end of the year I wanted to reward the Volunteers, so they each got about $1000 stipend - or whatever you want to call it.

I understand many of the reasons this is a bad idea, but one I didn’t expect is the worker’s comp audit. Now I’m showing an additional $130,000 in 1099s for volunteers that weren’t covered under the workers comp policy. The insurance company is saying that additional substantial fees may be owed for the Volunteers because they received some payments.

This is new territory for me so any advice would be appreciated.