Weird tax filter: Is my compensation for egg donation taxable?
January 4, 2012 6:30 PM   Subscribe

Is my egg donation compensation taxable if I don't receive a 1099 form? Details inside

I was an egg donor this past year and was compensated $10,000 for myself (under the heading of pain and suffering), plus travel and hotel expenses in the city where the retrieval took place. The checks that I cashed were in total over $10,000, so it can't be written off as a gift, even if it was, which it isn't anyway.

I have been searching on the internet for information regarding the taxability of egg donation expenses, but many of the information is old and all of it seems to pre-suppose my receipt of a 1099 form from the intended parents or IVF facility. I guess I could see if I receive one by Jan 31st, but while I was going through the process absolutely nobody mentioned anything about taxes and now I'm getting worried. I read one forum where people wrote to the IRS and "fought" the 1099 by claiming the compensation as pain and suffering, which is generally not taxable:

http://www.surromomsonline.com/support/showthread.php?t=60157&page=2

Nowhere in the contract that I signed did it say anything about a 1099 being issued.

I was wondering if anyone who has received compensation for donating eggs could share their personal experiences in reporting or not reporting donation compensation, as well as if any tax experts (or armchair tax experts) could give some guidance. I'm also not sure how state lines factor into it, because the donation took place in CA, while I live in MA. I'd just rather figure this out now and not when the IRS is auditing me and setting my house on fire. I'm a little leery of asking a professional accountant, because if I don't necessarily have to file it, I don't necessarily want anyone to know about it.
posted by anonymous to Work & Money (10 answers total) 1 user marked this as a favorite
 
This seems like it would be a subject that this blog might find interesting to write about. Worth emailing the blogger.
posted by Mr.Know-it-some at 6:41 PM on January 4, 2012


Okay, I don't know anything about the egg donation aspect, but I have a small understanding of one part of the 1099 aspect. If the income is meant to be subject to 1099 reporting, then it doesn't really matter if you actually receive the 1099 or not: the income must be reported.

In my instance, I did some freelance work, subject to 1099 reporting. The company went bankrupt, disbanded, and never issued me the 1099. According to my accountant I still had to report the income anyway.
posted by BlahLaLa at 6:45 PM on January 4, 2012 [2 favorites]


Seconding the idea that income is income whether it is reported by the payer or not.

Whether your egg donation counts as income is another story. Maybe if you contact the fertility center you worked through they would have some info to help?

See this publication from the IRS. Especially the part under "court awards and settlements", where it says these can be either actual court awards or compromises. Which seems applicable.
posted by gjc at 7:21 PM on January 4, 2012


IANYL, but I don't see any reason why money received for egg donation would not be taxable. A quick search of the IRS' site didn't turn anything up, but here's a link to a New York state government site saying that people who sell their eggs indeed owe federal income taxes.

I don't think it matters to the IRS what state you live in or where the procedure took place. It's possible that you would owe state income taxes in MA or CA, though.

You might consider going right to the source and calling the IRS - 1-800-829-1040. I know you're leery about telling anyone about it, but you might be able to talk to someone there without telling them any identifying information.

It might be a good idea to talk to a tax lawyer about this (it's definitely a good idea if you are thinking of fighting the IRS). You should know that, whether or not you decide to hire the lawyer to represent you, any conversations you have with him or her are probably going to be protected by the attorney-client privilege, so no one but the lawyer would learn about what you discuss.

Sorry you're going through this. Best of luck.
posted by burden at 8:54 PM on January 4, 2012


Might the IVF clinic be able to answer your question? I would think you would not be the first to ask.
posted by vignettist at 10:58 PM on January 4, 2012


(IANAL. IANACPA. I am not an expert.) When I googled "oocyte donor compensation 1099" the first thing I got was this question, but then I got a great whack of donor program sites in different states, all saying that they would issue a 1099 at the end of the year for the total amount of compensation (because some women donate more than once in a calendar year, I guess?)

I gather that some people have made the argument that the compensation is a physical injury or physical sickness settlement (pdf) and thus not taxable. But support boards are iffy sources for tax advice.

Without knowing whether this is taxable income or not, just on the matter of 1099s: Some people think that if they don't get a 1099, there was no tax liability. They are wrong. Taxable income is still taxable even when the payers foul up their obligation to notify the IRS, or fail to send you a copy. Some people hope that if they didn't get a 1099, the IRS didn't either, and that means the IRS doesn't know about their taxable compensation. They may or may not be wrong, but if they file a return knowingly understating their taxable income, they're breaking the law.
posted by gingerest at 11:52 PM on January 4, 2012


A tax accountant works FOR YOU, not for the IRS: their job is to determine your (minimum) legal tax debt, not to jack up your payment or find extra ways to increase your tax burden. Just asking a tax accountant a question about this will NOT result in their reporting the money to the IRS. They won't lie on any tax returns they file for you, because then they'd be legally liable, but they're not the 'tax cops' either.

Please note, I am NOT suggesting you go to something like H&R Block or Jackson Hewitt; find a professional tax accountant who has an office that's available year-round.
posted by easily confused at 3:41 AM on January 5, 2012


Potentially relevant question: is it illegal to outright sell eggs the same way it is to sell organs?

After thinking about this question some more, I think you need to double check your contract. Even though they labeled the money as pain and suffering compensation, which would mean that it's not taxable, there may be components of it that really were for other things. Like if you have to take an unpaid week off of work, you might owe tax on the portion of the money that replaced that week's wages.
posted by gjc at 6:15 AM on January 5, 2012


Potentially relevant question: is it illegal to outright sell eggs the same way it is to sell organs?

In general this doesn't matter in terms of having to include the income on your taxes, the IRS doesn't really care if your income is from legal activities or illegal activities, they just want all of your income included in your return. That's why online poker players in states where playing poker is explicitly illegal still need to report their poker income on their taxes. Same with bribes, kickbacks, money from illegal drug dealing, etc.
posted by burnmp3s at 7:41 AM on January 5, 2012


Not an expert, but looked it up out of curiosity. Here are the .gov or academic article links I found:

This article (pdf) about taxing payments received for body parts is really interesting. I mean, it talks about William Shatner's kidney stone. Upshot: taxable. Though it does say there's a commodity vs capital good distinction between regenerable body parts sold (hair, blood, sperm) versus nonregenerable (kidney, lung); technically, a woman is born with all the oocytes she will ever have (ie not continuously made like post-pubescent men & their sperm), although there are hundreds of thousands of them still present at puberty. Whatever that means...it doesn't matter: it seems to say either selling stuff from your body or providing a service is taxable income. It says the gray area is how it's the income is classified (for example, surrogacy can be seen as "income from a service, income from dealings in property, or 'rental' income") but it "does not change the fundamental tax result."...ie that $ came in, so taxes are due.

***
Thus, our resolution of this case leaves open the question whether the sale or contribution of blood is the performance of a service or the sale or contribution of a product, as did the former Fifth Circuit in United States v. Garber, 607 F.2d 92 (5th Cir.1979) (en banc). However, we do resolve one question arguably left open in Garber,5 i.e., that profit from the sale of blood does constitute income within the meaning of I.R.C. Sec. 61. Our alternative holding with respect to section 170(e)(1)(A) necessarily presupposes gain "if the property contributed had been sold." Our research has uncovered only one case squarely resolving this issue. In Green v. Commissioner, 74 T.C. 1229, 1232-33 (1980), the Tax Court, noting the sweeping language of section 61 itself and the expansive interpretation accorded to that language by the Supreme Court, held that a taxpayer's sale of blood gave rise to income as defined in section 61. With respect to this issue, we agree with the holding and rationale of the Tax Court. (from here) So the law is unclear if donating is providing a service or selling a good, but either way the $$ from it is taxable income.

****

This page from health.ny.gov says that "According to the Internal Revenue Service (IRS), you must pay taxes on any money you receive for donating your eggs."

****

And finally, even if you didn't get a 1099, you can assume that the IVF clinic is filing *something* with the IRS (I'm assuming that's who paid you)--why not call them? I'm sure you're not the first donor with this question. If the payments came from the intended parents directly for whatever reason, IRS could still find out about it from them, as they can claim the money as a medical expense. If they made less than $133,333, then they spent over 7.5% of their income on medical expenses, and could report that $10,000 they gave you in order to get a bigger deduction on their taxes. See here for IRS document laying out that paying for eggs is deductible as a medical expense.

***

Again, I am no expert, no accountant. Just got really curious about it, thought I'd pass on what I've got linked in my open browser tabs. Hopefully you end up speaking with an accountant--good luck!
posted by neda at 8:14 AM on January 5, 2012


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