Accounts Payable - Procedure 23715c

Procedure 23715c: Selecting and Paying Human Subject Participants

Contacts and revision dates:

Table of Contents

1. Overview
2. Selection of Human Subjects
3. Payment to Human Subjects
   1. Direct Payment    
   2. Loan or Personal Payment
   3. Controller's Office Responsibilities

Overview

Research project results are often dependent on utilization of human subjects for testing, tasting, reacting, dieting, exercising, responding to various stimuli, etc. As an incentive to encourage participation in the research, some grants provide funds for payments to the human subjects. These payments may be monetary (cash or gift cards) or non-monetary (VT logo items, etc.). The Internal Revenue Service (IRS) considers any payments made to individuals to be taxable; gift cards are viewed as a cash equivalent.

Gift card stock purchased must be a valid expenditure against the grant. The inventory of gift cards must be adequately controlled, issued, and accounted for. Gift cards cannot be purchased by using the P-card or the HokieMart because documentation of who the gift cards were disbursed to must be available prior to charging a grant fund. The procedure in place to accommodate the purchase of gift cards is to open a petty cash disbursement fund through the Bursar's Office. As the cards are used, the fund may be replenished by following the instructions under the heading below titled "Department responsibilities when the faculty member secures an Accounts Receivable loan from the Bursar’s Office or uses personal funds".

When such payments are made, the disbursements are handled as payments to independent contractors, not payments to employees for work performed. Human subjects are not paid as employees since the service provided is outside the scope of their normal job responsibilities within the University. All human subject payments are potentially taxable to the recipient, so tax reporting information will be required.

Selection of Human Subjects

Participants may be:

1. Full and part time employees of the university.
2. Full and part-time students of the university
   1. It has been determined by the Research Division and Designated School Officials for graduate and undergraduate students, that the eligibility for all students to participate in research studies is an integral part of the student experience. This includes students of all ethnic groups and citizenship categories. If participants are not US Citizens or Resident Aliens, please use caution to ensure that immigration regulations are not violated. Please contact the International Tax Specialist (in Payroll at (540) 231-7586 or finsadmin@vt.edu) if you have questions regarding participation of a non- resident.
   2. Students who are on financial aid assistance.
3. Non-university affiliated individuals.

Participants may NOT be: Employees, graduate students, or undergraduate students who are funded by the research grant to which the human subject payments will be charged as this is a conflict of interest. Departments should confirm appropriate usage of research funds.

Payment to Human Subjects

Direct Payment

Department responsibilities when payments are made via Virginia Tech check or direct deposit.

1. The department should obtain approval from the Institutional Review Board (IRB). Sponsored Programs procedures should be followed.
2. Select participants in accordance with this procedure.
3. Contact the Controller’s Office for guidance if questions arise related to making the payment or the eligibility of the subject to participate.
4. The PI or responsible department should obtain the necessary IRS form (listed below) for any payments, including gift cards and/or physical items, exceeding $300 in value. The forms should be secured within the department. 
   • W-9 for US tax residents which include US citizens, permanent residents, and US “residents for tax purposes only”. This form must include the person’s social security number. Employees do not need to complete a W-9 form.
   • W-8BEN form for all non-US tax residents.
   • Foreign National Data Form for all non-resident aliens
5. Enter a payment request form in HokieMart using category E11 and account 14137. Attach the necessary documentation to the payment request form. 
6. If processing payment to more than seven participants the batch payment process may be utilized. Please see the Batch Payment Processing Form and the Batch Interface Template on the Controller's Office website. 
7. Keep all disbursement records for a minimum of 7 years. The department copy of these disbursements must be kept to support tax reporting requirements and other legal matters. 

Note: If the participant is a US tax resident, and payments are $2,000 or greater in any one calendar year, the university is required to file a 1099 form with the IRS. For amounts less than $2,000, the participant is responsible for reporting the additional income, but the university does not file 1099 tax forms with the IRS.

If the participant is a non-resident for tax purposes, the payment (or item) is likely taxable at a rate of 30%. Withholding should occcur at the time of payment. Form 1042S will be issued to the participant and all payments reported to the IRS.   

Loan or Personal Payment

Department responsibilities when the faculty member secures an Accounts Receivable loan from the Bursar’s Office or uses personal funds.

1. The department should obtain approval from the Institutional Review Board (IRB). Sponsored Programs procedures should be followed.
2. Select participants in accordance with this procedure.
3. Contact the Controller’s Office for guidance if questions arise related to making the payment or the eligibility of the subject to participate.
4. The PI or responsible department should obtain the necessary IRS form (listed below) for any payments, including gift cards and/or physical items, exceeding $300 in value. The forms should be secured within the department. 
   • W-9 for US tax residents which include US citizens, permanent residents, and US “residents for tax purposes only”. This form must include the person’s social security number. Employees do not need to complete a W-9 form.
   • W-8BEN form for all non-US tax residents.
   • Foreign National Data Form for all non-resident aliens
5. Faculty member secures a disbursement loan from the Bursar or uses personal funds.
6. When participant information is not included in the required payment documentation due to confidentiality restrictions, the department must complete the Human Subject Confidentiality Certification Form.  A copy of the completed form must be kept on file in the department and submitted with the payment request.
7. Faculty member makes disbursements and secures receipt documentation from the human subject participants.
8. Complete either a Emburse Non-Travel Reimbursement Expense Report or a HokieMart ISR to ‘VT Bursar – AR Pymts’ as appropriate.
   • Emburse Non-Travel Reimbursement Expense Report: Completed when requesting reimbursement to a faculty member. Attach supporting documentation, including IRB approval, proof of payment by the faculty member, proof of receipt, and the Human Subject Confidentiality Certification Form (if needed). 
   • HokieMart ISR: Completed when requesting payment against an Accounts Receivable loan (petty cash) from the Bursar. Complete the ISR form in HokieMart using the ‘VT Bursar – AR Pymts’ vendor. Use account code 14137 and attach the IRB approval, proof of payment by the faculty member, proof of receipt, and the Human Subject Confidentiality Certification Form (if needed).  The purchase requisition will be reviewed and approved by Accounts Payable, and sent to the Bursar for a journal entry to be processed to charge the grant and credit the faculty member’s disbursement loan.
9. Keep all disbursement records for a minimum of 7 years. The department copy of these disbursements must be kept to support tax reporting requirements and other legal matters.

Note: If the participant is a US tax resident, and payments are $2,000 or greater in any one calendar year, the university is required to file a 1099 form with the IRS. For amounts less than $2,000, the participant is responsible for reporting the additional income, but the university does not file 1099 tax forms with the IRS.

If the participant is a non-resident for tax purposes, the payment (or item) is likely taxable at a rate of 30%. Withholding should occcur at the time of payment. Form 1042S will be issued to the participant and all payments reported to the IRS.   

Controller's Office Responsibilities

1. Review the payment documents for completeness, supporting documentation, including tax forms for individuals.
2. Process the payment to the human subjects, repayment of the Accounts Receivable Loan, or reimbursement to the faculty member in accordance with the purchase order.
3. Issue checks or direct deposits to the recipients.
4. Apply the appropriate tax withholding when applicable.  Record and submit payment and tax information to the IRS via 1099/1042S forms when applicable.

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