For medical study income reported on a 1099-MISC, what constitutes "perform a service"?

[sbonds]

This question seems to affect some significant things later on, most notably whether this income allows for a Roth IRA contribution.

What are the IRS guidelines for what it means to "perform a service to earn the money" in a medical study? This particular situation is for a relatively intensive study involving multiple days of being hooked up to various monitors. Showing up all day, multiple days seems like it would be "performing a service" but I couldn't find where this edge case was clarified. Where can I find more information about what "performing a service" means?

[DoninGA]

See answer here - https://ttlc.intuit.com/community/retirement/discussion/income-question-does-income-from-a-medical-s...

Income for participating in a clinical trial or medical study is taxable.  If the activity is infrequent, the income would not be self-employment income.  The IRS discussed that position in the Internal Revenue Service's Private Letter Ruling 9106004 regarding a participant in a medical study for asthma.

What that means is that it would be subject to income taxes, but not subject to self-employment tax.  It also would not qualify the participant for the earned income tax credit or any other tax benefit that is dependent on earned income such as an IRA deduction.

[sbonds]

I didn't find a clarification about what "perform a service" means from that posting. Do you know where more information about that specific question can be found?

[DoninGA · Accepted solution]

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@sbonds wrote:

I didn't find a clarification about what "perform a service" means from that posting. Do you know where more information about that specific question can be found?

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Perform a service is in reference to self-employment where the individual is a sole proprietor or independent contractor who has a trade or business and provides a service for compensation.

IRS website for self-employment - https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center#S...

Who is Self-Employed?

Generally, you are self-employed if any of the following apply to you.

• You carry on a trade or business as a sole proprietor or an independent contractor.
• You are a member of a partnership that carries on a trade or business.
• You are otherwise in business for yourself (including a part-time business)

[Mikenn2003]

I am on ssidi and the medical study income is my only income is it also taxable, I thought it was a combination reimbursement for time and travel 

[Opus 17]

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@Mikenn2003  wrote:

I am on ssidi and the medical study income is my only income is it also taxable, I thought it was a combination reimbursement for time and travel 

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Income earned performing a medical study is taxable.  It is not "earned income" (income earned from performing work or services) but it must be reported as taxable income.  If more than $600, the payer should give you a form 1099-MISC.  It may come in the mail and they have until January 31, 2021 to mail them out.  You should not get a 1099-NEC.  If you get a 1099-NEC, write back for more information on how to avoid the self-employment tax. 

In the past, you may have been able to deduct mileage, but not after tax reform.  You can't deduct anything for your time, that's why you are being paid.  

[Mikenn2003]

What if I didn't get more than 600$ in the calendar year 

[Mikenn2003]

• Will it effect my tax free ssdi income 

[Opus 17]

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@Mikenn2003  wrote:

What if I didn't get more than 600$ in the calendar year 

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You are required to report and pay tax on all your income.  You can enter this as "other income" in the program, I believe medical research is an option there.  Just make sure that if you are asked any test questions to determine self-employment intent, you answer no (not like your regular work, not intended to earn a profit, etc.)

If you get no tax documents, it is unlikely that the IRS will catch you if you don't report it.  But the legal requirement is in the law.   

SSDI may be affected by income earned from working, but is not affected by income from other sources, like investments or prizes.

Also, if your taxable income is less than $12,400, you won't pay any income tax even if you report it.

[Soccer340]

Hi,

I was in a clinical trial and received a 1099-NEC for my compensation ($720). Reading this thread, I understand this to be subject to income tax but not self employment. However, when I enter the 1099-NEC in the software, it gets pushed to a Schedule C which makes it subject to self employment taxes which doesn't seem right. Any suggestions how to proceed?

Thanks in advance.

[LinaJ2020]

If this is a regular side job, you are considered as self employed.  If it is just a one time income, you would enter as Other Income.  You do not need to enter info under Schedule C section.  Here are the steps:

In TurboTax online, 

• Sign into your account, select Pick up where you left off
• From the upper right menu, select Search and type in 1099nec and Enter
• Select the Jump to 1099nec
• Follow prompts

This will show on line 8 of your Schedule 1 and Form 1040.