Honorarium
An honorarium – is a specific type of payment for provided services that aren’t obligatory to be paid for. Therefore, this type of payments is considered to be optional. It’s commonly used to pay for temporary work of volunteers, guest speakers, consultants, etc. It’s a widespread form of payment among the universities. Usually, these payments cover the associated expenses of the workers. For example, they might cover travel or accommodation costs. However, the honorarium payments can be denied by the speaker or volunteer if he decides to cover own expenses.
The honorarium is frequently considered as self-employment income that is liable to tax as any other type of income. But it depends on the laws of the country in question.
Size of the Honorarium
The term “honorarium” is translated from Latin as a “gift”, thereby may be more of a gesture than an actual payment for work done. However, there are a few principles to determine the fee that a payer should contemplate.
The honorarium size has to be computed according to the amount of time and efforts invested into work. Time spent on preparation is also included. For example, a university invites a guest speaker to a conference. The speaker spends around five hours for speech preparation, one hour for creating a presentation, one hour for a rehearsal, and finally, he’ll spend one more hour for the speech performance at the conference itself. Overall, this work will take about eight hours of the speaker’s time and should be paid accordingly. If the speaker comes from afar, the travel expenses might also be fully or partially covered by the honorarium.
Note that the honorarium is different from a per diem. Although it’s similarly aimed at covering the workers’ expenses, the per diem is a daily payment in contrast to the honorarium.
Taxation of the Honorarium
Like any other income, the honorarium is taxable. However, taxation policy might vary in different countries, regions, or states. Let’s take a look at the honorarium taxation in the US as an example.
In the US, the honorarium has to be reported to the Internal Revenue Service (IRS) as well as to the payee. If the honorarium exceeds the limit of $600 per year, the payer has to file a 1099-MISC form of the IRS. If not, he still has to report the payment, but the filling of this form isn’t required.
Although the payee also reports the honorarium as self-employment income, there are a few exceptions. These payments might be seen as a gift on several occasions, such as weddings and baptisms. The important condition of this exemption is the sides’ agreement to consider the honorarium as the gift.
Another important notification is that the payee can arrange a tax return for the expenses uncovered by the honorarium. In order to do this, he has to fill out the IRS Form 1040 (Schedule C).
In the US, it might be necessary to report a few tax forms concerning the taxation policy of different states. For example, it might be needed when a speaker performs at a conference in another state.
