Q: I recently donated my eggs and received over $5,000 but under $15,000. The agency never gave me a W-9, do I have to pay tax? I read on a forum that you only pay tax if you receive more than $15,000? What should I do?
A: Hi Emily, Thank you for sending in the question.
This has been a confusing issue for many donors. The simple answer is yes, you will need to report the money you received on your taxes. It does not matter how much money you received, as there is no threshold for it.
In 2015 the IRS decided on the case of Perez v Commissioner. The argument was on whether or not egg donation is considered income for pain and suffering which would be non-taxable. The IRS and court’s view was to consider it taxable income. They compared it to a boxer who gets paid for taking severe punishment in the ring. They are getting paid for their pain and are voluntarily subjecting themselves to it for financial betterment.
The good news is that you can deduct expenses related to going through the process. Most of the common examples are mileage, meals, and travel expenses. Those expenses will reduce the amount of tax you must pay, if any.
W-9 and 1099s are not always collected or issued by the agencies. Regardless of whether you receive a tax document for the income it is still your responsibility to report it to the IRS. Not reporting the proper amount of income can lead to penalties and interest. For the surrogates and donors we work with I always recommend going to a CPA to help reduce their tax liability. Turbo Tax does not do a great job when it comes to egg donors and surrogates.
—Edward Brockschmidt, CPA & Co-Founder of SeedTrust Escrow
Every Friday, CPA and Co-Founder of SeedTrust, Edward Brockschimdt, will focus on “financial fitness” by answering the most commonly asked financial and tax questions relating to surrogacy and egg-donation.
If you have a question that you would like answered, please comment or drop us a line at [email protected] and we may answer your question in the upcoming weeks.
For additional answers to tax related questions please see Brock’s profile on JustAnswer.com by clicking here.