Human Subject Payments & Taxation
With the exception of non-Vanderbilt sponsored persons in H-1B status, international persons can receive a gratuity for participation in clinical or research studies. Participants are not employees of Vanderbilt University but are considered to be independent contractors for the purpose of receiving the monetary gratuity or gift. Depending on the amount of the gratuity provided, It may be necessary for records of such payments to be maintained for fiscal and IRS reporting purpose. If a record needs to be maintained, the International Tax office will create a tax record for all payments where the international participant is identified.
Gratuity Payments of $25.00 or Less
Payments of less than $25.00 do not have to be reported to the IRS and no tax withholding analysis is required. The International Tax office will not undertake a tax analysis for gratuities of $25.00 or less.
Nominal Payments to Human Subject Participants:
If a principal investigator decides to give small items that may be considered promotional in nature and/or nominal in value no tax withholding will occur. A nominal payment is considered $10.00 or less per day (or partial day) of participation in the clinical trial or research study OR a total payment of no more than $65.00. It does not matter how long the human subject participates in the study each day. If the person provides only a few minutes or a few hours of participation, it is still considered one day or a partial day of participation.
- Research study requires participant to be seen by principal investigator for 60 minutes a day for 5 days. Nominal compensation for full participation would be $50.00 or any amount under $65.00.
- Clinical trial requires participant to remain overnight for two consecutive days. Nominal compensation for full participation would be $20.00 or any amount under $65.00.
Principal investigators are free to provide financial compensation in an amount of their choosing but the International Tax Office must undertake a tax analysis for all payments over $65.00 regardless of the length of the study. This does not mean that the $65.00 will be automatically taxed; in some cases, there will be no taxation (see below). Also, bear in mind that not all research projects compensate participants, and participants in projects that offer compensation may decline payment if they prefer to do so.
IRS Reporting of Payments to Human Subject Participants:
The Internal Revenue Service requires compensation in the aggregate of $600 or more paid to an individual during a calendar year be reported on Form 1099-Miscellaneous income. Payments above the "nominal payment" criteria, made to human subjects who are nonresident aliens are reported on Form 1042-S. All payments to nonresident aliens are subject to 30% federal income tax withholding. However, for payments above $65.00 or that do not otherwise meet the nominal payment criteria, the International Tax Office will utilize all applicable tax regulations to reduce or exempt the income tax withholding. Any and all appropriate tax treaty benefits and personal daily allowances will be applied to the payment to lower income tax withholding.
Forms To Complete:
International persons (business visitors) receiving payments over $65.00 for compensation as human subject participants are required to complete the online Business Visitor Questionnaire (BVQ) and allow ITO to create an international tax record before payment will be issued. The online BVQ can be found here. Note again that persons in H-1B status who have not been sponsored by Vanderbilt University, cannot receive compensation for human subject participation. These persons may participate in clinical or research studies but no compensation can be provided as this violates the terms of their H-1B visa status. Vanderbilt-sponsored H-1B employees, however, can receive compensation since they hold an employment relationship with Vanderbilt.
Vanderbilt-sponsored international persons in F-1, J-1, TN, H-1B, E-3 or O-1 visa status should not complete the BVQ. If they expect to receive a payment of over $65.00 (for being a human subject particiant), they should update their international tax record (Windstar) to show receipt of a "Miscellaneous Payment." If no international tax record exists, access to the database can be requested using the Windstar Access Request Form.