My understanding is that employees cannot get a 1099 and a W-2 from the same place.  That is what came out of our university IRS audit (or at least I think that was the determination).  So, if they are employees the payment has to be recorded as salary and end up on their W-2 form.  This goes for gift cards, which the IRS views as cash, as well.  Our university was audited by the IRS and we do have a very conservative approach to this and other employment issues because my understanding was the fines that could be imposed were sufficiently large.  Even all our stipends to participants have to be reviewed by our HR to determine if the payment can be 1099 based or if the payment should instead be considered employment.  Some stipends are determined to be financial aid if for students and then it can have the effect of reducing their other awards.  So sadly, in some cases the stipends paid as financial aid have actually had a negative effect on the student account.

 

In the interest of full disclosure, I was not personally involved in the IRS audit other than being a one of our university business officers and being apprised of the issues at our meetings.  So, if you want additional information about our situation I would suggest you speak to someone in our controllers’ office. 

 

It is a huge mess and a huge nightmare.  Good luck.

 

 

 

 

 

I understand that some persons view this as a second career and try to make money as research subjects but something still seems wrong about the source of the payment being the driving factor.  The IRS says to issue a 1099 if over $600.  It seems to me that the problem then becomes one between the individual and the IRS.  As long as the institution issues the 1099 then we have done our part.  The payment is not compensation for work or matriculation.  It is a small token to encourage participation or thank a participant after the fact.  What about payments from petty cash for anonymous surveys?  Clearly I have not been on the receiving end of an IRS audit in this regard because those who have seem very conservative in their approach to this issue.  Please continue the discussion.  I am very interested to see where this takes us.

 

Thanks to everyone who has contributed.  BTW – I have seen a couple universities who consider (by policy statement) ALL research participants as independent contractors.  Would not a formal policy statement such as that consistently applied (non-resident aliens notwithstanding) address issues for the IRS as long as 1099’s are being sent?  BTW – for any auditors lurking on the list, your opinions are valuable as well but you should know that my institution and I disagree so please don’t think we don’t get it here!!

 

Thanks.

 

 

The researcher is supposed to collect SSN information from every participant, and the institution logs that information as part of the payment process, at least in most cases.  We also explicitly ask subjects to give us their Duke ID if they have one, just to make cross-checking easy.  As I recall, researchers can ask for an exemption to the SSN requirement if there is a reason (e.g. studying populations where written records will be an active disincentive to participation).  It is definitely an administrative hassle, but management thinks that the extra employee effort is worth it to reduce audit risk.

 

Keep in mind that we do have some subjects who actively look for research subject opportunities, and we have some fairly large-scale studies, so some subjects can receive substantial yearly payments.  Also, we have some 35,000 employees and are located in a relatively small region, so a lot of our subject pool just naturally comes from employees.  The decision was that the prudent course would be to get SSN information from all participants, so that we can correctly withhold for in-house folks and issue a 1099 when any outside participant goes over the reporting threshold ($600/year currently, I think).

 

And yes, that’s exactly how it works for the gift card scenario.  Employees don’t usually walk away with cash or cash-equivalents.  Again, there are occasional exceptions, but those would be quite rare and carry minimal risk.

 

 

 

Adam,

 

At Duke, who is then responsible for determining whether a potential research subject is also an employee and thus must be reimbursed differently than other subjects?  Is the researcher required to ascertain this information up front, or does the institution somehow cross-check all participants centrally to determine whether or not a given individual is also an employee?

 

I gather that you might have scenarios where some participants might receive, say, $10 gift cards, but university employees are instead paid that amount through payroll (with taxes, etc. taken out)?

 

Thanks for the input!

 

Bill

 

 

William Sharp, Ph.D.
Assistant Director, Research Administration

Office of Research | The University of Kansas

2385 Irving Hill Road

Lawrence, KS  66045

(785) 864-7430 | xxxxxx@ku.edu 

 

 

 

 

There are IRS tax implications in paying employees (including students) outside your payroll system.  Our institution often gives cash payments or other incentives directly to research subjects drawn from the general public, but we require employees to receive such payments or incentives as supplemental pay through the regular payroll.  That’s true whether the supplemental pay is for participation as a research subject, catering an event, being hired as a musician or performer, etc.

 

Anything outside an employee’s normal work scope, but still paid by the institution for services rendered, must be paid through the main payroll system.

 

Our institution doesn’t evaluate financial aid on a less-than-annual basis, so for our institution, this would not immediately impact a student’s financial aid package.  Large, regular sums received might impact the income analysis for the following year; however, research subject payments are generally small and infrequent enough that I would not expect them to have much of an impact.

 

 

 

How does your university handle human subject payments for participants when those participants just happen to be an employee or a student.  I contend that classification based on employment or matriculation is NOT specifically why these persons became subjects but that they are subjects by virtue of a general population they represent (ie, males between 18 and 25 or women with bachelor of science degrees in low paying jobs). 

 

I have seen some university procedures that treat all human subject participants (regardless of where they come from and assuming they are NOT non-resident aliens) as independent contractors.  I have seen other university procedures where the employees are taxed on the payment and the students have their financial aid reduced due to the payment (or in some cases an outstanding campus parking ticket).

 

Something doesn’t seem quite right about the latter and I am one of those annoying people who wants to see chapter and verse of the regulation before I am comfortable enforcing something that might be unnecessary or unfair.  Yep, I know that seems arrogant and snarky and bossy (all the bad words you can think of) but I really don’t like adding rules on top regulation on top of more regulation unless it is critical to do so.

 

Open to lively conversation about this from this group.  I will admit in advance that I am on thin ice when it comes to understanding student financial aid or loans or scholarships so I am hoping to learn something too.

 

 

Martha M. Taylor

Assistant VP for Research

Auburn University

310 Samford Hall

Auburn, AL 36849

xxxxxx@auburn.edu

 

 

 

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