How Much Research Medical Study Money Before Taxes

James Due west. Rahmlow

In a recent Tax Courtroom instance, a taxpayer was determined to be required to report as gross income the payment received for participating in a medical study. In the instance at hand, the taxpayer, who had gout, participated in a medical study of gout and received a payment of $5,550 as compensation for his services.

Although the taxpayer received a Form 1099-MISC for the amount, he did not report the payment as income considering he felt that the payment was excludable from income nether Code Sec. 104 as damages received for injuries or sickness. The Tax Court held that in club for the payment to be excludable from income, the taxpayer must show "a direct causal link" between the taxpayer's gout and the subsequent participation in the study.

The court found that the medical study payment was nothing more than compensation for participation in the study. The Tax Court referenced the U.S. Supreme Courtroom'south decision in Commissioner v. Schleier, 95-1 USTC %50,309 as justification.

First guidance to be issued on new Medicare taxes

The IRS stated in mid-November that it plans to issue proposed regulations by the end of 2012 that deal with the new Medicare taxation provisions in the Patient Protection and Affordable Intendance Act. Among other things, the regs will deal with the clarification and computational aspects of the iii.8 percent Medicare contribution taxation and the 0.9 percent additional Medicare revenue enhancement, both of which are scheduled to take effect in 2013. Final regs are expected to be issued in advance of the 2014 filing flavor for 2013 tax returns.

Updated bankruptcy tax guide problems

In tardily Oct, the IRS posted an updated version of its Publication 908, Defalcation Tax Guide on its website (www.irs.gov). The guide clarifies certain items resulting from the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. On its website, the IRS reminded taxpayers that beginning June 24, 2011, an automated half dozen-month extension is bachelor to file a bankruptcy manor income taxation return for individuals in Chapter 7 or Affiliate 11 bankruptcy.

Additionally, the guide reminded taxpayers that until Jan. 1, 2010, sure participants in a 401(k) plan that sought bankruptcy protection were able to brand additional catch-upwards contributions to the programme. Subsequent to the Jan. 1, 2010, engagement, participants are no longer able to make additional grab-up contributions.

Lath of trustees member is an independent contractor

A taxpayer who was serving on the board of trustees of a banking concern was subject to cocky-employment taxes on the payments received for his services on the board. The Tax Court held that the private was an independent contractor and not an employee of the depository financial institution.

While members of boards of trustees are more often than not classified every bit independent contractors under Code Sec. 3121(d), the court institute that the role of a bank trustee may not be similar, which necessitated the court looking to common law rules to determine whether the taxpayer was an employee or an contained contractor.

These mutual constabulary rules, as a refresher, included:

1. The caste of control exercised by the bank;

2. Which party invests in work facilities used by the individual;

iii. The opportunity of the individual for profit or loss;

four. Whether the depository financial institution can belch the individual;

5. Whether the work is office of the banking concern's regular business concern;

6. The permanency of the relationship; and

vii. The intent of the type of relationship created by the parties.

The Taxation Court reviewed these seven points and concluded that the majority of the evidence weighed in favor of classifying the bank board of trustees member as an independent contractor.

Qualified plan limits appear for 2013

In a recent information release, the Internal Revenue Service announced retirement programme and IRA limits and maximums for contributions and benefits in 2013. While not all are increased, at that place is a favorable trend for those wishing to fund a larger dollar corporeality for their retirement. Below are some of the highlights:

• Elective deferrals for 401(k), 403(b), certain 457 plans and the federal government'southward Thrift Savings Plan increase from $17,000 to $17,500. Catch up contributions remain at $five,500 for 2013.

• Contributions to Code Sec. 415(c)(ane)(A) divers contribution plans will increase from $50,000 to $51,000.

• Maximum do good limit which tin can be paid under a 415(b)(one)(A) defined benefit plan to a participant increases from $200,000 to $205,000 in 2013.

• Maximum deductible IRA contributions nether Code Sec. 219(b)(5) increase from $v,000 in 2012 to $5,500 in 2013. The take hold of-up contribution remains at $1,000. Notation that there are phase out income levels on these contributions.

• Contributions under Code Sec. 408(p)(two)(E) for SIMPLEs increases to $12,000 in 2013, upwards $500 from 2012. The catch-upward contribution remains at $2,500.

Increase in Social Security wage base of operations and benefits

The maximum dollar amount of earnings subject to Social Security tax volition exist increased in 2013 to $113,700 from the $110,100 maximum in 2012. Unless the 2012 payroll revenue enhancement holiday is extended by Congress, the rate to exist charged as the employee'due south share of these taxes volition exist 6.ii percent. Considering of the payroll tax holiday, the rate was only four.2 percent.

For those receiving Social Security benefits, the amount will increase past ane.7 percent for 2013. This is significantly less than the 3.6 percent increase for 2012.

James West. Rahmlow, a certified public auditor, is a partner with Mengel, Metzger, Barr & Co. He can be contacted at jrahmlow@mmb-co.com.

Source: https://nydailyrecord.com/2012/12/28/keeping-your-balance-participation-in-medical-research-study-is-taxable-income/

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