Payments to Research Subjects: What is Taxable Income?

Kristina Lopienski
August 29th, 2017

Compensation received from clinical research participation is a hot topic. Often, individuals who participate in clinical trials will receive payment from the research site conducting the study. While compensation can be minimal, such as reimbursements for expenses like parking, some research volunteers, unfortunately, make a living out of participating in clinical trials, earning up to tens of thousands of dollars per year. Are either of these types of payments considered taxable income that needs to be reported to the IRS?

The IRS requires study payments of $600 or more to be reported on tax returns. Reimbursements, or payments based on receipts to cover expenses incurred by the participant because of their clinical trial participation (most often travel-related) are excluded from this requirement. These out-of-pocket expenses are not considered taxable income.

When cumulative payments over a calendar year equal or exceed $600 across studies, the site should obtain a W-9 tax form from each participant. The site should also generate a Form 1099-MISC once the amount paid reaches $600 and send a copy to the IRS and participant. The IRS states in the instructions to Form 1099-MISC that Box 3 should be used to report “(a) payment or series of payments to individuals participating in a medical research study or studies.”

Policies and SOPs may vary site to site, but IRS reporting requirements should always be included in the informed consent discussion with the volunteer prior to participation. These requirements should also be clearly explained in the informed consent form.

An exception: rare disease patients

In 2015, President Obama signed a bipartisan clinical trials compensation bill for rare-disease clinical trial participants. An update to a 2009 law, the two-page bill titled “Ensuring Access to Clinical Trials Act of 2015” allows patients with rare diseases to receive up to $2,000 per year without having the payment count as income that could jeopardize eligibility for Supplemental Security Income (SSI) and Medicaid.

With support from several dozen groups of stakeholders, including patient, industry, academic and medical organizations, the bill removed income-related barriers to trial participation. For individuals with rare diseases who receive SSI and Medicaid, the fear of becoming ineligible to receive government medical benefits may stand in the way of their decision to participate in a clinical trial. This bill meant the majority of patients won’t have to choose between participating in a potentially lifesaving clinical study and keeping social safety net programs that are essential to their ability to afford healthcare.

Why only rare disease patients? Due to limited patient populations and complex eligibility criteria, it’s very difficult to enroll enough patients in rare disease clinical trials. Only a few hundred of the estimated 7,000 rare diseases in the US have FDA-approved treatments. If participating in a clinical trial meant potentially losing Medicaid or SSI – a necessity for many living with these expensive diseases – there’s no doubt it would affect the process of bringing new treatments to market.

Is it fair that patients are taxed for the compensation they receive from clinical trial participation? Comment below.

Need a better way to pay subjects? Check out Forte’s participant payment system.

10 Comments

10 thoughts on “Payments to Research Subjects: What is Taxable Income?

  1. What happens if research participants are expected to donate the payment ($750) back to the research study? Is this legal? They were surprised I wanted to receive the money. No W-9 was ever completed; the girl wrote my SS# on a sticky note. I then heard repeatedly that the check was in the mail, until finally they said they had submitted it for payment the day before.

    1. it’s probably legal – but it makes no sense. the point of the payment is to provide incentive for people to participate in the clinical trial. by expecting you to donate the money back, you essentially receive no payment, and thus there is no incentive. no incentive could possibly mean no participants, resulting in no clinical trial.

      honestly, i wouldn’t trust these particular researchers. did you ever receive the check?

  2. Question so can a person do clinical trials while pending appeal for Social security disability

  3. Your statement that “The IRS requires study payments of $600 or more to be reported on tax returns.” is incorrect. The IRS requires that ALL income received be reported on your tax return. If the payments total more than $600, the payer is required to issue the Form 1099. If audited and the payments are discovered (bank statements are review and deposit sources must be explained) additional tax, interest and penalty can be assessed if amounts are not reported.

    1. I was told that, if a person makes less than $600 from one employer, combined studies, as an Independent Contractor… you don’t need to report it. My understanding is that it’s your “title,” such as Participant, Contractor, employee, is what determines what is taxable. If a person made $600+ as a Participant, it’s reported. If a person files a 1099 as an Independent Contractor, claiming $600+ from total jobs..taxable. I’m definitely no accountant..so dont quote me. Lol!

  4. Are overseas clinical trial participants subject to OFAC compliance? If mobile payment is means to disburse participant fees, but subject does not have mobile account, they use another individual’s account as substitute. Is that allowable?

  5. In 2018 I began participating in a clinical trial for weight loss and received $700 in 2018 and received form 1099 MISC with Box 7 (Non-Employee Compensation) filled in. Because box 7 was marked for non-employee compensation, I have to file Schedule C and pay self-employment taxes on the amount. Why is Box 7 marked, and not Box 3 Other Income? I am not in the business of participating in clinical trials and it seems strange that I have to pay self-employment taxes on this.

  6. Why is reimbursement for travel expenses considered “compensation”? I just started a research study where I am not receiving any compensation for participation, but I’m fronting the travel expenses and getting those costs reimbursed. I have concerns how a 1099-Miscellaneous Income will affect my disability benefits through my employer since I’m not allowed to have other income, not to mention increasing my net income on my taxes when it’s simply reimbursement. Does Box 3 on Form 1099 distinguish between payment vs. reimbursement? Also, I believe the study would be considered for a rare disease, but how can I find out for sure?

    1. Hi Todd, we recommend referring these questions to the site at which you are participating in the clinical trial, they should be able to provide guidance for you. Thanks!

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