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

Forum|Forum|6 years ago
November 12, 2019
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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?

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Best answer by DoninGA

@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?

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#SelfEmployed

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)

DoninGA

Employee

See answer here - https://ttlc.intuit.com/community/retirement/discussion/income-question-does-income-from-a-medical-study-have-to-be-reported-if-so-how/00/418923

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.

S

sbondsAuthor

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?

DoninGAAnswer

Employee

@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?

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#SelfEmployed

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)

M

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

O

Opus 17

Employee

@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

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.