An honorarium is otherwise called an ex gratia payment. It is a voluntary payment made to an individual for the services they render, this type of fee is not legally required. This type of payment is often made to a volunteer or guest speaker as a recognition of the role of the individual. An honorarium is not an official charge, neither is it required traditionally, this type of payment is made by a giver who has no legal obligation to the receiver. An honorarium is regarded as a taxable income.
A Little More on What is an Honorarium
Individuals give volunteers, speakers or invited guests honorarium to compensate them for their efforts. It is a way of showing that the service rendered by an individual is recognized. Oftentimes, honoraria are given to cover costs such as travel expenses or feeding expenses for a speaker at a conference or symposium. An example of an honorarium is a sum of money given to a medical expert to speak at a medical talk organized for teenagers, or given to a farmer for training other farmers. Generally, honoraria are given to show appreciation to individuals, it is not a payment or money legally required.
Determining an Honorarium
An honorarium is determined by the giver, it is also dependent on the amount of effort an individual put in the delivery of the service. Most times, there is a predetermined amount that some people give as an honorarium but the amount can change depending on how well an individual impress the giver of the honorarium. In certain cases, a speaker at a conference put much effort in preparing the speech to be delivered to the audience. Also, the stress of traveling and the expenses accrued by the individual are considered when determining honorarium. The giver of the honorarium also considers many other ways through which the receiver can generate money with the time spent for preparation.
Tax Treatment of an Honorarium
The Internal Revenue Service in the United States regards honorarium as an income, it is their subject to tax payments. Just like other income, honoraria are reported to the IRS by organizations who pay them. Honoraria that exceed $600 a year are filed on a 1099-MISC form. Receivers of honoraria report it on Schedule C of Form 1040. Honoraria given for duties that are not part of the individual’s business are reported on line 21 of Form 1040.
In some cases however, honoraria are tagged gifts and not taxable income. Examples of such honoraria include honoraria given to ministers for weddings, speeches and related activities.