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a11
Level 1

Egg donation tax reporting, Roth IRA eligibility?

I received money from donating my eggs and that will be my only income this year as a student. I want use it to max out my Roth IRA and I'm confused if this income counts as "earned income" since it is taxable. I have heard of egg agencies issuing 1099s and having donors report as self employment tax but my agency does not issue them. I've also heard of donors reporting it as other income on line 21 of 1040. I'd rather not be subject to the high self employment tax but I want to be able to have income to contribute to my Roth. I'm also confused about the standard deduction and am wondering if that means I won't have to pay taxes since my compensation is less than the deduction. I've never filed taxes before and sorely need advice on this matter, thanks

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Level 20

Egg donation tax reporting, Roth IRA eligibility?

Egg donation is not earned income.  It should be reported on a 1099-MISC in box 3, not box 7, and even if it is reported in box 7, should be reported as "Other income."  You are not engaged in an "ongoing trade or business" and the income is not subject to 15% self-employment tax.

Consequently, it also does not qualify as earned income to allow you to contribute to a traditional or Roth IRA. 

For 2018, the standard deduction for a single person is $12,000.  If your compensation is less than that, you will owe no income tax, and don't need to file a tax return at all.  However, if you receive a 1099-MISC and don't file, you may receive a letter from the IRS asking why you did not file.  So your options would be, file a tax return showing no tax owed but listing the 1099-MISC for the sake of listing it; or not filing, and responding to any IRS letter you may receive by telling them this was your only income and it was not from self-employment, so no tax is owed and no return was required.

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Level 20

Egg donation tax reporting, Roth IRA eligibility?

Egg donation is not earned income.  It should be reported on a 1099-MISC in box 3, not box 7, and even if it is reported in box 7, should be reported as "Other income."  You are not engaged in an "ongoing trade or business" and the income is not subject to 15% self-employment tax.

Consequently, it also does not qualify as earned income to allow you to contribute to a traditional or Roth IRA. 

For 2018, the standard deduction for a single person is $12,000.  If your compensation is less than that, you will owe no income tax, and don't need to file a tax return at all.  However, if you receive a 1099-MISC and don't file, you may receive a letter from the IRS asking why you did not file.  So your options would be, file a tax return showing no tax owed but listing the 1099-MISC for the sake of listing it; or not filing, and responding to any IRS letter you may receive by telling them this was your only income and it was not from self-employment, so no tax is owed and no return was required.

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Level 12

Egg donation tax reporting, Roth IRA eligibility?

A couple of notes:

(1)  If you regularly sell your eggs, it could be a business (self employment, and therefore eligible to contribute to a Roth IRA).

(2)  If you are a full time student under age 24 and your total income from the egg donation is over $1050, reporting it as "other income" will result in requiring to file a tax return and likely owing tax.  The $12,000 threshold would not apply in that situation.
Level 2

Egg donation tax reporting, Roth IRA eligibility?

What if this is not the only income you are earning during the year? For example, if I have a salary position making $50K and make $5K from an egg donation, how would this change the situation?

Level 20

Egg donation tax reporting, Roth IRA eligibility?

Nothing would change regarding the income from the egg donation and where to enter it. You would have to file a tax return due to your salary income. The income from both your salary and your egg donation are entered on the same tax return. 

Level 2

Egg donation tax reporting, Roth IRA eligibility?

So I would just pay taxes at my current tax rate? Also, do I wait until I file my tax return to pay taxes or do I need to pay them sooner?

Level 20

Egg donation tax reporting, Roth IRA eligibility?

You should probably increase your withholding on your current salary by at least 10% or pay estimated taxes in the amount of $5000 times your current tax bracket to avoid an underpayment penalty when you file your tax return. Here is how to pay estimated taxes directly to the IRS: https://www.irs.gov/payments/direct-pay