Honorariums (to Non-employees) Policy
The tax treatment of Honorarium payments will vary depending on the facts and circumstances involved in the relationship of the lecturer to the agency or university. Further complicating the matter is defining the term honoraria. Technical, honoraria is a payment ot a professional in situations where payment is not required or expected. Generally speaking, a payment is probably expected or required by the lecturer. The following is an outline of various situations that could exist in regard to payments of honoraria.
The general rule for honoraria payments is where an individual accepts an occasional invitation to deliver a speech for which a payment is made. There is no continuing relationship with the contracting agency/university beyond this occasional lecture. The agency/university my dictate the general topic of discussion. However, the lecturer, by virtue of his knowledge and experience in the subject matter, has control over what and how the information is to be presented. In this situation, the lecturer would be considered an independent contractor for tax reporting and withholding purposes. Please note, the amount of the payment is usually not a factor in determining employment status. Whether the lecturer received $50 or $2,000 would not be as important as a continuing relationship with the payor and the amount of control exerted by the payor over the lecturer in regard to subject matter and presentation. In this situation a for 1099 Misc should be issued if over $600 amount.
Another situation that could exist is where the agency/university pays a guest lecturer to speak more that occasionally, such as teaching a course or seminar. In 1989, the IRS issued Private Letter Ruling 8925001 which advised schools and universities to treat adjunct faculty members as employees for purposes of FICA and income tax withholding. The word adjunct, as used in this PLR, means professors or instructors who are part of the teaching staff without having full-time or permanent status. This PLR is applicable to teaching situations where the university recommends the books, teaching materials, establishes working hours and determines which courses are to be taught. In this situation a form W2 should be issued.
In certain rare instances honoraria may be considered a gift, rather than taxable compensation to the recipient. Several U.S. Tax Court cases interpreting Internal Revenue Code Section 61, Gross Income have found that where the intent is to provide a gift rather than to compensate for services rendered, there would be no tax liability to the recipient or reporting requirement to the payor. For example, in W.H. Cunningham, (CA-3) 3 USTC 1161, 67 F2d 205, a corporation after the resignation of its president voted him a sum as an "honorarium in appreciation of his excellent guidance of this corporation," this was a gift rather than compensation to the president. There is no reporting requirement for gifts.