People and organizations sometimes provide services that merit monetary compensation but which propriety prevents them from requesting. For example, a world-famous professor might give a speech for a scholarly foundation, after which the foundation would give her what's called an honorarium. An honorarium is basically a one-time payment made to individual outside an organization for services performed by that individual. Of course, there are tax implications to giving and receiving honorariums.
How an Honorarium Works
Many people of professional accomplishment, such as university professors, receive honorariums on a regular basis. An honorarium is a way to give someone performing a service for which set compensation rules don't exist a kind of "thank you" gift. Universities, government agencies and other organizations such as religious groups also have policies governing payment of honorariums to their members. The Internal Revenue Service, as well as many state tax agencies, considers an honorarium to be taxable income.
Honorariums and Taxes
Organizations paying honorariums normally must report those payments to the IRS and state tax agencies where applicable. When honorariums to an individual total $600 or more in a year, they send him IRS Form 1099-MISC. The 1099-MISC is used to tell the IRS that the person named on the form received taxable payments during the year. Generally, if you're going to be paid an honorarium, the organization giving it will need your Social Security number or an IRS taxpayer identification number.
Income Tax Exceptions
There are exceptions to the IRS rule requiring taxation of honorariums. For instance, the IRS allows ministers an exception to taxation of honorariums paid for performing services such as weddings, baptisms and giving speeches. In some instances, an honorarium may be considered a gift, rather than taxable compensation to the recipient, if the genuine intent was to give it as a gift.
Reporting Your Honorariums
If you've received honorariums and such payments are a regular part of your business, report them on Schedule C of your IRS Form 1040 tax return. If honorariums aren't a regular part of your business, just report them as "other income" on Line 21 of your IRS 1040 tax return. State tax rules on honorariums may vary, though states such as North Carolina mirror the IRS rules.
- University Corporation for Atmospheric Research: Honorarium Payment Guidelines
- University of Alaska Fairbanks: Honorariums
- Inman News: When, and When Not, to File Form 1099-MISC
- Tax Girl: Ask the Taxgirl: Speaking Fees and Honorariums
- Internal Revenue Service: Publication 517 - Exemption from Self-Employment (SE) Tax