1099-Misc Box 3 income that maybe should be Box 7

Question

As my main job, I am a college math professor (W2 wages). Last summer (2018), independent of my main employer, I worked teaching math to high school students and was paid 10K for it. I received a 1099-MISC for this work with the money shown in Box 3. I've received 1099-MISC Box 7 payments (mostly honoraria) in the past and always reported them on Schedule C.

My impression based on researching Box 3 is that it is intended for oddball payments far from ones main line of work, and doing work similar to ones main job is usually Box 7. I am concerned that this income belonged in Box 7 and the IRS will fine me for not paying self-employment tax if I simply report it on Line 21 of the 1040.

It seems to me I have three options

File Schedule C, as if the payment was in Box 7. (I would not deduct any business expenses.)
Report the income on Line 21. In which case, what do I call it?
Contact the people who paid me and ask why they think this is Box 3 and if they would like to amend it.

Any risks, benefits or options I am missing?

WesH · Answer

I am not a tax professional by trade or training.

Correct, honoraria over $600 are taxable and require filing schedule C.  Self employment tax will apply.

This appears to be an error on the part of the issuing institution.  Based on the description of Box 3 from the instructions for 1099-MISC, there is no reason that this would apply to you.  There are some confusing bits in there that might have misled the accountant.

Also enter in box 3 prizes and awards that are not for services
  performed.

Emph mine.  Since you performed a service by receiving this award, Box 3 does not apply.

Prizes and awards received in recognition of past accomplishments in
  religious, charitable, scientific, artistic, educational, literary, or
  civic fields are not reportable if: 
  
  • The winners are chosen without
  action on their part,
  
  • The winners are not expected to perform future
  services, and 
  
  • The payer transfers the prize or award to a charitable
  organization or governmental unit under a designation made by the
  recipient. See Rev. Proc. 87-54, 1987-2 C.B. 669

This is the tricky one.  While it would seem that you are not expected to perform a future service as the honorarium is issued upon completion of the seminar/symposium and you were chosen without advertising it, this is not recognition of past accomplishments.  You were asked to come perform an academic service and paid for your time.

It would be wise to ask the issuing institution to correct the form.

I am not a tax professional by trade or training.

1099-Misc Box 3 income that maybe should be Box 7

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