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.