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SSI Payments. The “Orphan Drug Act” income exclusion applies

to the first $2,000 per...
SSI Payments. The “Orphan Drug Act” income exclusion applies to the first $2,000 per calendar year received by an SSI beneficiary, spouse, or deemor as compensation for participation in clinical trials. If the first $2,000 of income received for participation of a clinical trial is exempt from income, therefore the company compensating for the research does not have to issue a 1099-MISC if it does not exceed the $2,000?
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8/14/2017
Mark Taylor
Mark Taylor, Certified Public Accountant (CPA)
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The company would still issue a 1099 if the amount exceeds $600. The first $2,000 would be excluded by the individual.

https://secure.ssa.gov/poms.nsf/lnx/0500830735

. Payments as compensation for clinical trial participation

Effective April 3, 2011, exclude from income the first $2,000 paid during a calendar year to an SSI beneficiary, spouse, or deemor as compensation for participation in a clinical trial, but only if the clinical trial meets the following requirements:

  • must be reviewed and approved by an IRB;

  • must involve research and testing of medical treatments; and

  • must target a rare disease or condition.

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Customer reply replied 3 months ago
the individual will still need to fill out a W-9, receive the 1099-MISC code Other Income and when they do their personal taxes, they will exclude this income from their tax return? And, how would they address the issue if they receive a letter from IRS stating they have adjusted their return for Missing Income?

Yes, the individual will still need to complete a W-9 and receive a 1099-Misc. When they prepare their return they will be able to exclude the income. I would suggest reporting the income (other income on form 1040) and then in a separate line backing out the $2,000 with a description Orphan Drug Act. This should prevent any notices.

Mark Taylor
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