1099-MISC, BOX 7 OR BOX 3?

[Edward]

Taxpayer receives 1099-Misc, Box 7 with 2100.00? I think it should go in box 3 instead.

She has been taking pills under a voluntary medical research testing program. She signed up to participate in the program - took these pills for nearly 1 year and gets the 2100. and its placed in Box 7 and not box 3. The organization tells me they have been doing it this way for the past 10 years. In looking at the IRS instructions for Box 3 entries it says: "Prizes & awards received in recognition of past accomplishements in SCIENTIFIC AND EDUCATIONAL are not reportable if the winners are chosen without action on THIER PART - but she did volunteer? Anyone know how I should handl this? Thanks

[Margaret CPA in OH]

I think - always dangerous - that it is correct in Box 7. There are some people who actually make a modest income by being guinea pigs, if you will, for scientific and medical research, not unlike those who give blood for money on a regular basis. You definition states 'prizes and awards...' not compensation. I think this is compensation not a prize or award.

[Edward]

Then this will be subject to SE Tax - isn't there something wrong with that? or do we consider it self-employment income? Thanks

[kcjenkins]

It is taxable compensation, but it is not SE taxable unless it is earned in a trade or business. Since she is not 'in the business' of being a guinea pig, I'd link it to Line 7 rather than to a Sch C. That is what the instructions advise.

[Margaret CPA in OH]

Thanks, KC, for your usual clarification. I don't always write all that goes through my mind. I was actually thinking of Line 21, but I think your suggestion to link to Line 7 is the better option. Still learning...

Edward, I am sorry that I didn't specify Line 21 which is what I was thinking. In this case, you are stating that this individual did not engage in this as a trade or business and I think KC's clarification was on target.

[kcjenkins]

Line 21 was my instintive choice too, but then I decided, before popping off, to check the instructions, and that says it should go to Line 7. And that is the only automatic link for box 7 onless the return includes either a C, an F or a C-EZ.

[Diane]

On the same subject: I have a 20 year old (in college) who received a 1099Misc for work at a Summer Camp. And she also received a 1099Misc for some work for the American College of Surgeons. She is not self employed, just working during the summer while attending college. Would these amounts go to Line 7? In 2008 I put the Summer Camp income on Line 21. IRS came back and reclassified the income as Self Employed and charged her self employment tax.

Diane

[kcjenkins]

I think you need to put those on a Sch C-EZ, Diane. Or else you need to file form 8919 if you believe the tp was in fact, an employee, not an independent contractor.

[Diane]

Thanks for the reply. I have put both the 1099Misc on Schedule CEZ. I was kind of hoping that using Line 7 was an option.

Diane

[Edward]

kcjenkins is always there with the great responses - thanks again for your help!!! You're

the best.

[kcjenkins]

:wub: Thank you. :wub: