How to tax an honorarium received for a graduate student attending a Summer Institute

Forum|Forum|1 year ago
January 20, 2025
1 reply
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My graduate student client was invited to attend a 10 day Summer institute in June of 2022 by the Jack Miller Center in Denver CO. She had to commit to all 10 days which she did and attended all 10 days. During that period she attended daily morning seminars, breakout sessions, and afternoon workshops. The Jack Miller Center provided air travel, lodging and all meals at no cost. She did not lead any of the seminars, breakout sessions or workshops. She was only a participant in the program.

In addition she received what they previously described as an Honorarium of $1,500 upon completion of the program. She later received Form 1099-NEC for $1,500.

How should I report the $1,500 of income she received for her attendance? Other income or Self-Employment income subject to Self-Employment tax?

Lacerte Tax

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Best answer by Dodgerfan

Thank you for your response.

The 2022 returns were filed on time in April 2023.
Actually, the client just sent me the CP2000 for her 2022 return. The IRS assumed that the income had not been reported at all. I had originally reported the 1099-NEC income as part of her taxable scholarship & fellowship income which was reported as other income not subject to SE tax on the tax return. I thought that was the proper treatment.

This amount was not part of a fellowship and was categorized by the Institute as an honorarium.

The IRS shows the 1099-NEC amount as SE income. She also had excess advanced premium tax credit which would have been increased if the income had not been reported at all. The amount including interest would have been over $1,000.

So the question comes down to whether or not the 1099-NEC income is subject to SE tax. If not , how do I support my position that it is not?

I was successful! I called the Tax Practitioners Hotline and was transferred to the Under reported Income Section (The CP2000 claimed that the income reported on the 1099-NEC was not reported since they took the stance that this was SE Income). I explained that the income had been reported correctly as Other Income since the taxpayer had received the income as a result of having attended the Summer Institute as a participant only.

The IRS representative accepted my explanation and quickly made the correction to the return. She even stated that she would notify the State of California of the correction.

Thank you all for your helpful suggestions.

Skylane

Intuit Community Champion

Other income not subject to SE.

If at first you don’t succeed…..find a workaround

D

DodgerfanAuthor

Level 3

Thank you for your response. Is there any authoritative support for your answer? The IRS thinks that if you receive a 1099-NEC with an amount in box 1 it is self-employment income subject to self-employment tax. The instructions for form 1099-NEC indicate that other income not subject to self-employment tax should be reported in box 3 of Form 1099-MISC.

Everything I have read seems to state that an honorarium requires reporting on Form 1099-NEC.

BobKamman

Level 15

What the IRS thinks is interesting, but what goes on a tax return is based on law and not opinion of which form should have been used in 2022. Are you just getting around to filing this return? Or is it not even necessary unless you're worried about SE tax? In any case, IRS has finished all the CP-2000 document matching for 2022, and it is highly unlikely that they would issue a notice based on about $200 tax difference. De minimis non curat lex.

Actually, this is what IRS thinks: Do not use Form 1099-MISC to report scholarship or fellowship grants. Scholarship or fellowship grants that are taxable to the recipient because they are paid for teaching, research, or other services as a condition for receiving the grant are considered wages and must be
reported on Form W-2. Other taxable scholarship or fellowship payments (to a degree or nondegree candidate) do not have to be reported to the IRS on any form, unless section 6050S requires reporting of such amounts by an educational institution on Form 1098-T.

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