An honorarium is a voluntary payment given to a person for services where fees are neither legally nor traditionally required. It is often aimed at covering expenses for activities such as speaking engagements and is generally considered taxable income. For instance, a guest speaker at a conference might receive an honorarium to cover travel expenses.
Distinguishing From Per Diem Payments
An honorarium differs from a per diem, which is a daily allowance provided to employees or consultants for business trip expenses like accommodation, travel, and meals.
How an Honorarium Works
An honorarium is often granted for services that meet a certain standard of compensation propriety, preventing the service provider from requesting payment. For instance, a distinguished professor might deliver a speech at a scholarly foundation and receive an honorarium for their expertise and effort.
The amount of an honorarium is typically influenced by the effort involved. For example, delivering a one-hour speech might require three days of preparation, practice, travel, and recovery. These activities, coupled with the opportunity cost, help justify an honorarium.
Key Insights
- Honorariums compensate guest speakers who do not charge a fee for their services.
- They are commonly used in academic circles by universities and other institutions.
- A recipient can choose to return the honorarium and cover expenses out-of-pocket.
- The IRS considers honorariums as self-employment income, subjecting them to taxation.
Tax Treatment of an Honorarium
An honorarium, like other income forms, is taxable. Organizations that make these payments must report them to the recipient and the Internal Revenue Service (IRS) on a 1099-MISC form if the amount is $600 or more in a single calendar year.
Recipients must report the honorarium as income, even if they do not receive Form 1099. There are few exceptions, such as certain religious activities that may render the honorarium as a gift instead of taxable compensation.
An honorarium is considered self-employment income and is typically filed with associated expenses on Schedule C of IRS Form 1040. Expenses that can be deducted may include unreimbursed travel and lodging costs, materials for speeches, website maintenance, and the use of a cellphone for business. If honorariums are not part of regular business activities, they are reported as other income. Also, honorariums are subject to self-employment tax.
Speakers who travel out of state for engagements may face additional taxation, as some states consider the activity a taxable event (nexus), potentially leading to multiple state tax filings and payments.
Related Terms: taxable income, 1099-MISC form, self-employment tax, per diem.
References
- Internal Revenue Service. “Publication 525: Taxable and Nontaxable Income”, Page 3.
- Internal Revenue Service. “Instructions for Forms 1099-MISC and 1099-NEC (2021)”, Pages 1-2.
- Internal Revenue Service. “Topic No. 417 Earnings for Clergy”.
- Internal Revenue Service. “2020 Instructions for Schedule C (2020)”, Pages 9-10.
- Internal Revenue Service. “Form 1040 (2020)”.
- Internal Revenue Service. “Self-Employment Tax (Social Security and Medicare Taxes)”.
- Harvard University. “Honorarium”.
