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Business and Financial Policies and Procedures

Payments to Human Subjects

Policy Statement

The University of Illinois System often conducts research projects that involve the use of human subjects. When human subjects are offered financial incentives to participate in research, they are paid in the form of cash/cash equivalents to participate. All human subject payments must be made in compliance with an approved IRB Protocol.

Human subject payments may be paid in the form of cash, cash equivalent (such as gift cards/certificates/electronic-codes), or check depending on the circumstances of the study and the dollar amounts involved. In the event that a good or service is provided in exchange for or as a requirement to participate in a research study, the taxability of the good or service will depend on IRS tax reporting requirements.

Personal funds cannot be used for payments to human subjects. Risks of allowing the use of personal funds include non-compliance with tax reporting rules, and payments before official approval of Institutional Review Board (IRB) protocols.

All human subject payments must be processed using account code 141200 unless the payment is to a nonresident alien. Human subject payments to a nonresident aliens (as defined in 18.2 Foreign Nationals) must be processed using account code 215985.

The Internal Revenue Service (IRS) requires tax reporting for human subject payments.

Reason for the Policy

Federal tax and immigration laws require compliance with the rules and regulations pertaining to processing compensation for participants in human subject studies. Failure to comply with these procedures may result in a violation of Federal Law.

Applicability of the Policy

This policy is applicable when providing payments to human subjects for participation in research, regardless of the funding source.

18.10 Human Subject Payments and IRS Reporting Requirements

Note: This policy is intended for the purpose of informing employees and other University of Illinois System-related individuals about relevant tax issues. This policy does not constitute legal or tax advice. Individuals should consult with their attorneys or tax professionals for advice on personal issues.

Human Subject Payments to U.S. Citizens, Resident Aliens, and Permanent Residents 

The IRS requires reporting on human subjects payments when they exceed certain amounts. The University of Illinois System is required to request the human subject's Taxpayer Identification Number (TIN), in order to fulfill its tax reporting responsibilities with the IRS if payments total $600 or greater during a calendar year. The System reports these payments to the IRS on a 1099-MISC, Miscellaneous Income form. The principal investigator must provide University Payables (UPAY) with the TIN for individuals identified in this policy for tax reporting purposes. The principal investigator and UPAY must keep the TINs collected as confidential.

When a human subject is paid a single payment which is greater than $200 or at the time cumulative payments for a calendar year exceed $200, it is the System’s policy to obtain tax identification information from the human subject. This is required because a human subject may participate in several studies and receive payments with a cumulative value equal to or greater than $600, which would require reporting of these payments on IRS Form 1099-MISC. To obtain tax identification information from a human subject, the human subject should be presented with both an IRS W-9 form and W-8BEN form. It is the human subject’s responsibility to determine which form applies based on their tax reporting status. The System cannot provide tax advice to human subjects.

Human Subject Payments to Nonresident Aliens

Researchers are not required to inquire about an individual’s tax reporting status to participate as a human subject; however, if it is known that an individual is a nonresident alien or the System has reason to know that an individual is a nonresident alien, payments must be processed in accordance with this section.

Payments to human subjects that are known to be nonresident aliens, or payments to human subjects the System has a reason to know the individual is a nonresident alien, must meet IRS tax reporting requirements. The confidential nature of a study does not exempt the System from the IRS tax reporting requirements identified in this section. A nonresident alien is an individual who is not a U.S. citizen or a resident alien. A resident of a foreign country under the residence article of an income tax treaty is a nonresident alien individual for purposes of withholding.

All payments to human subjects who are nonresident aliens, regardless of the amount, are required to be reported to the IRS on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding. The System is required to report these payments when it is known or the System has reason to know that a human subject is a nonresident alien pursuant to 26 U.S.C. § 1441.

It is known or the System would have reason to know that a human subject is a nonresident alien through one or more of the following four manners:

  1. The IRB protocol’s inclusion criteria requires that human subjects be nonresident aliens;
  2. The human subject self-identifies as a nonresident alien;
  3. The research being conducted provides information which identifies the human subject as a nonresident alien; or,
  4. The System has other information available to know or have reason to know that the human subject is a nonresident alien.

Prior to making a payment to a human subject who is known or who the System has reason to know to be a nonresident alien, the System must request a completed IRS Form W-8BEN. IRS Form W-8BEN includes the human subject’s full/legal name, tax identification number, and address.

The Federal rate of 30% and State rate of 4.95% will be withheld for all payments to nonresident aliens unless a U.S. Tax Treaty applies.

If an individual’s payment is subject to a U.S. Tax Treaty, the payment may be exempt from or have a reduced withholding. Nonresident aliens may request an exemption to this withholding based on a tax treaty. The following must be submitted to University Payroll and Benefits (UPB) prior to a payment being made:

UPB will review this information and make a determination whether or not a U.S. Tax Treaty applies and adjust the withholding accordingly.

UPB is responsible for maintaining the information required to prepare IRS Form 1042-S for tax purposes. Due to the IRS tax withholding requirements identified in this section, payments to nonresident aliens must be made via check through UPB. Payments cannot be made with cash or cash equivalents (gift cards, certificates, codes, etc.). The information captured on Form 1042-S, is singularly provided for each individual payment to the IRS, as required by law.

UPB may be contacted with questions at:
Chicago 312-996-7200
Springfield 217-206-7211
Urbana-Champaign 217-265-6363

See 18.2 Foreign Nationals, and the Award, Prize and Human Subject Payments, for additional information.

Human Subject Payments to Employees

Payments made to human subjects who are also employees are treated the same as payments for human subjects which are not employees unless an employer/employee relationship exists within the study or participants are limited to employees only. In such rare cases, payments are reported on Form W-2, Wage and Tax Statement and subject to income tax and Medicare withholdings. For additional information regarding independent contractors versus employees, see 17.2 Classification of Independent Contractors Versus Employees. For payments to employees who are nonresident aliens, see above. When making a human subject payment to an employee that requires tax reporting, a University Identification Number (UIN) is an allowable replacement to a social security number, or individual’s tax identification number. Payment requests must be made through and approved in PARIS. Indicate the reason as “additional Time Worked/Pay”; enter Earn Code “HSE”; and add a comment identifying the amount to be paid and “Human Subject Payment”.

Payments to Human Subjects Without Tax Reporting Information

If a human subject is requested to provide information for tax reporting purposes and he/she refuses to or is unable to, payments to the human subject will be subject to the IRS Presumption Rules. Specifically, all payments to the individual will be subject to the IRS backup withholding of 28% unless the human subject is known to be a nonresident alien or the System has reason to know the individual is a nonresident alien. If the human subject is known or presumed to be a nonresident alien, then the payment will be reported on IRS Form 1042-S and subject to the Federal rate of 30% and State rate of 4.95% will be withheld as explained in the Human Subject Payments to Nonresident Aliens section.

Human Subject Payments in the Form of a Good or Service

If a good or service which is purchased by the System is required for participation in a research study, the fair market value (at the time the good or service is provided to the human subject) may be reportable for tax purposes if the good or service is unrestricted for use by the human subject outside of the research study. The fair market value of a good (at the time it is provided to the human subject) is also taxable if the ownership of the good will remain with the human subject at the end of the study.

If the good or service is provided in exchange for the human subject’s participation in a study, the fair market value of the good or service is subject to reporting for tax purposes.

When goods or services provided to a human subject have a fair market value exceeding $200 in a calendar year, the fair market value of the good or service at the time it is provided to the human subject must be reported following the requirements in 8 Payments and Reimbursements – Tax Implications for Payments.

Collection of Tax Identification Numbers from Human Subjects

When collection of tax identification information is required under this policy, it must be kept confidential. Confidential tax identification information includes, but is not limited to the following:

This information must be collected in compliance with 19 Business Systems Access and Security - Social Security Numbers

Payments to Human Subjects Procedures

Open a Program Advance to Pay Human Subjects in Cash or Cash Equivalents
Reconciliation of a Program Advance
Replenish a Program Advance to Pay Human Subjects
Close a Program Advance to Pay Human Subjects
Partial Close of a Program Advance to Pay Human Subjects
Request Checks Made Payable to Human Subjects

Additional Resources

Urbana-Champaign: Office for the Protection of Research Subjects
Chicago: Office of the Vice Chancellor for Research
Springfield: Grants, Contracts and Research Administration
Payments to Human Subjects Flowchart (updates in process)

Last Updated: November 15, 2017 | Approved: Senior Associate Vice President for Business and Finance | Effective: November 15, 2017

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