1099 Misc

[tonia2021]

I have several college age clients that take part in medical reseach studies. These clients recevie a 1099 at the end for the year. Do these taxpayers have to pay SE tax? Does it depend on how often they take part in the studies? If they do it once it may not be a business. However, what if they take part in as many studies as they can - does this make it a business which would require SE tax? Are there any publication that answers this?

[DaveO]

Never SE income

This is always on line 21. Don't care how often they do it. Being a human pin cushion does not a trade or busness make.

[tonia2021]

Two of my clients from last year just got letters saying they owe SE tax. Will a simple letter fix this, or is there something I could reference?

[DaveO]

Did they report the income on original return?

I have had clients get a notice when they left the income off. A letter identifying the income as a medical study was all it took. They of course had to pay income tax but not SE tax. I haven't been able to find a cite you you.

[Kram BergGold]

Get a letter

Get a letter from the payor stating that the pay was for a medical study. Then just say to IRS my client was not in business, he just signed up for a medical study. I should think this would do it.

[erchess]

hmm

How much money does one make for being in a Medical Study? Is the relatively small income the reason that one cannot be in the trade or business of being in Studies? I have heard of some pretty strange trades or businesses including entering contests and gambling.

[Fuzzy Faced Leader]

It seems to me this is gambling income, that the testing doesn't maime, or kill you. Definitely Line 21.

[tonia2021]

The income was reported on the original return and income tax was paid on it. However, it showed up on the 1099-Misc, so I think that is why the IRS is probably assuming it is subject to SE tax. Would you make a statement on the tax return that it is for medical testing. Some of these kids are making a lot of money (for a college student) some studies pay as much as $4500 and some do more than one. The majority of 1099s I see from this are in the 1000-3000 range.

[Davc]

The courts have determined that giving blood for consideration can be a trade or business, so I think this could be also depending on the usual facts & circumstances.

[gkaiseril]

Which Box

First, if amount is less than $400.00 in any box not SE tax due, so one can use line 21 of the 1040. Over $400.00 see the instructions for each box.

If the payment is reported in box 3 of the 1099-Misc line 21.

If the payment is reported in box 7 of the 1099-Misc the instructions from the 1099-Misc:

"Box 7. Shows nonemployee compensation. If you are in the trade or business of catching fish, box 7 may show cash you received for the sale of fish. If payments in this box are SE income, report this amount on Schedule C, C-EZ, or F (Form 1040), and complete Schedule SE (Form 1040). You received this form instead of Form W-2 because the payer did not consider you an employee and did not withhold income tax or social security and Medicare taxes. Contact the payer if you believe this form is incorrect or has been issued in error. If you believe you are an employee, call the IRS for information on how to report any social security and Medicare taxes or see Form 8919, Uncollected Social Security and Medicare Taxes on Wages."

If you disagree attach a statement explaining in detail why this is not a Schedule C item.

Are there any reimbursements for travel, meals, lodging, etc included with the payments? If so then these amounts should be deducted from the payments received as an expense.

[travis bickle]

being a lab rat

does not make it se income.

what possibly happened [op did not specify] was that the income was reported incorrectly in box 7 [as opposed to box 3].

when income is reported in box 7 the irs expects a schedule c, and therefore se tax.

a letter to the irs will fix this up. . . sometimes even a phone call.