Is compensation from a clinical trial considered taxable income?

Tomorrow I’m making my first visit to a clinic to participate in a trial for an experimental asthma drug, and the clinic says I could be paid as much as $575 for doing so. I have a feeling I won’t make anything close to this, but I was curious nonetheless about whether this would be considered taxable income. If so, will the taxes be deducted from the check automatically, or will I have to handle that myself when I do my taxes in early 2006? And is it taxed at a special rate, like my bonus checks are?

I am not a tax lawyer, but I cannot think of any reason why it would not be taxable. I would expect that you will get the entire amount paid to you, after which the clinic (or whoever) will send you a 1099 form, next January, documenting your income. (They will also send a copy to the IRS.) You will then be responsible for paying the taxes.

The easiest way to discover the real situation will be to ask a manager (not the clerk or nurse or technician taking down your info) how it will be handled.

Yes it is. I do research studies in my office(and have also been a guinea pig for other studies). You are required to fill out a W-2 and the earnings are reported as taxable income.

W-4, maybe?

That will generate a W-2 next January (and possibly mean that they will deduct payroll tax and F.I.C.A. from the earnings).

However, I would be surprised if they would want to claim each participant as an employee (reported on W-2) as opposed to a an outside contractor (reported on 1099). I wonder if Demo’s W-4/W-2 is realted to him already being an employee of the outfit performing the study.

Surely you mean a W-4.

I’m sorry, W-4 is correct, and no, everyone who participated in the studies I mentioned previously had to complete a W-4 and had the stipend reported as income.

When you think about the millions the (in my case pharmaceutical) companies are shelling out to research volunteers it makes a lot of sense.

And, if you will allow me to stick my foot in my mouth one more time, let me take that all back and start over.

I just talked to our research coordinator and she informed me the form that I and any other study volunteers fill out is called a W-9 (they all look the same to me! :smack: )

Apparently they keep these on file, but only report study income if it totals over $600 for that year. That’s how our site handles it, I’m not sure if that is the case in every situation.

I apologize for the incorrect information above.

I’m sorry, that is incorrect. The correct response was, “Yes, I meant ‘W-4’. And don’t call me Shirly.” You won’t make it to our next round, but we do have some lovely parting gifts for you.

Your bonus checks are not taxed at a special rate. The person issuing the bonus checks may do the tax withholding at a different rate (for a variety of obscure reasons), but when you actually report that income on your 1040, it’s taxed just like your other income. If too much was withheld, you’ll get some of it back. If not enough was withheld, you’ll have to cough up a bit more. Generally, the only income that’s taxed differently is capital gains (like from selling stock).