Should surrogacy compensation be reported as taxable income? Are surrogates issued a 1099 for their compensation? This topic remains a controversial issue. SeedTrust has recently received several questions on whether we issue 1099s for Surrogates who use our escrow services.
In short, it is very rare for SeedTrust to issue a 1099 form.
We do not issue 1099s unless it is specifically requested by the Surrogate or the Surrogate has agreed to receive one.
SeedTrust will only issue a 1099 in the following instances:
- The Surrogate requests a 1099
- The Parent and Surrogate both agree to a 1099
- The 1099 is required as part of the GSA signed by both the Parent and Surrogate and is requested by the parties
- The parties’ attorneys have agreed that a 1099 will be issued
What if the Surrogacy Agreement doesn’t include information about issuing a 1099?
Sometimes the underlying Surrogacy Agreement does not specify whether a 1099 should be issued, which leaves the Parties at odds. When disagreements like this happen, SeedTrust, at no cost to either Party, takes on the role of an informal mediator and works with the Intended Parents and Surrogate to arrive at a mutually agreeable solution. These informal mediations almost always end successfully, with the Parties agreeing on mutually beneficial terms.
What happens if the two parties can’t reach an agreement?
In the very rare instance where the parties cannot reach an agreement, the matter is turned over to the Parties’ respective attorneys and resolved via formal legal proceedings.
The two most common scenarios are as follows:
Scenario 1: The Surrogate delivers a healthy baby, and the account moves into the closing stage. During the closing process, the Intended Parents direct SeedTrust to issue the Surrogate a 1099.
SeedTrust’s trained legal staff first looks to the express terms of the underlying Surrogacy Agreement. If the contract does not provide clear guidance on the issue, SeedTrust will ask the Surrogate if they agree to the issuance of the 1099. If the Surrogate agrees to the issuance of the 1099, one will be issued. However, If the Surrogate declines or disagrees with the Intended Parents, the informal mediation process begins.
If the Surrogate and Intended Parents cannot reach a mutually agreeable conclusion via informal mediation, the matter is turned over to the Parties’ respective attorneys and resolved via formal legal proceedings.
Scenario 2: The Surrogate is in the middle of her journey and would like 1099 to report her surrogacy income on her taxes.
SeedTrust will issue the 1099 by January 31st of the appropriate tax reporting year.
We hope these scenarios and explanations clarify how SeedTrust handles 1099s. Our goal is always to put Surrogates and Intended Parents at ease and reduce financial stress for everyone. For further questions, we encourage everyone to speak to their legal manager at SeedTrust.