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Do surrogate moms have to pay income tax?

George SaenzDear Tax Talk,
I served as a surrogate carrier in 2004 and gave birth earlier this year. The contract was prepared through a surrogacy agency's lawyer. My question is: Do I have to report my compensation? If the agency will 1099 me, wouldn't I have received any forms to file by now?

I don't want to communicate with that agency anymore and I wonder what should I do?

I do feel I shouldn't have to pay taxes for being compensated for helping a couple to have a baby. What about all the needles, sticks, stretch marks and pain/suffering I went through? Is there any way I can go about this dilemma?
-- Alcia

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Dear Alcia,
Although I didn't feel your pain, I sense it.

Unfortunately, however, it sounds to me like you have income. Although your generosity allowed a couple to have a child, I can't see how that would change the fact that you were compensated for your services. In fact, the payment would not be considered a gift, as it was not made with gratuitous intent.

You are right in that the agency probably should have issued you a Form 1099 by now, if the payments were made in 2004, but maybe you didn't receive it through error. This, however, would not change your responsibility to report taxable earnings.

The amount you received would be considered other income, reportable on line 21 of Form 1040, and would not be subject to self-employment tax since it is not business-related. The reimbursement of your medical expenses by the contracting couple would not be considered income to you. However, you cannot exclude payments from income for pain and suffering and stretch marks, because these are not expenditures.

 
-- Posted: May 24, 2005
   

 

 
 
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