Re: Sale of Blood or Plasma

The reason I suggested schedule C (or C-EZ) is only because I have seen taxpayers report this income for the purpose of earning Social Security credit. One does not earn Social Security credit for other income, only self-employment income or wages.

The taxpayers I have seen using this approach are ... I don't know quite how to put this without seeming callous or insensitive so I'll just dive in... pretty marginal members of society who seem unlikely to reach 40 quarters of wage-earning employment. In these instances, reporting the sale of plasma or cans or whatever is a calculated approach with a specific goal. Generally, there is a more-coherent ring-leader showing up at the VITA site with a gaggle of less-coherent (sometimes drunk or otherwise impaired, sometimes just beat down by life) friends all reporting the same $1000 (or whatever the threshold is for that year) in income for the year.

Regardless of the requirement to report all income from whatever source derived, whether or not one receives a reporting document, I generally do not see the more middle-of-the-road taxpayers going to the effort of reporting this type of low-dollar, infrequent cash income.

-Crystal

The defining test is whether or not it is a regular activity. If one routinely sells his blood as often as the plasma center allows, month after month, year after year, then it is business income.

(Sure can't call this a hobby item. lol)

ChEAr$, Harlan Lunsford, EA n LA

I see the instructions for Schedule C say: "An activity qualifies as a business if your primary purpose for engaging in the activity is for income or profit and you are involved in the activity with continuity and regularity. For example, a sporadic activity or a hobby does not qualify as a business."

So it seems to me that someone reporting less than say six visits a year to sell their time to give blood plasma qualify as only being "sporadic" in this activity. Unless maybe they did this 6x a year, year after year, maybe for their little "Christmas present fund" or something similar.

Such "sporadic" income thus goes on the "Other Income" line (in 2007, line 21 of Form 1040). This does not count as "Earned Income" for the purposes of the EIC. Nor can a person get Social Security etc. credit.

Should someone eligible for the EIC wish to claim the income from blood plasma sales as business income, then ISTM that close questioning is in order. Generally speaking, those low income folks taking the EIC are more likely to be audited than those who do not. Anyone wanting blood plasma sale income to be counted as "business income" must be able to convince an IRS auditor that the activity was continuous and regular, or at least "not sporadic."

To me, two questions remain:

1. Is it such a stretch to say a person is self-employed such that his/her business is to sell her body's abilities in any way s/he can to support his/her family? Whence yard work, cleaning homes, selling blood plasma donation time, singing on the street with hat out, running messages, etc., in short one is continuously and regularly selling any menial service they can to make ends meet? If one can prove this is what they do "regularly and continuously," then I think it would have a good chance of withstanding any IRS challenge. The point of EIC is to get people to earn their income, after all. Is this not what someone scrambling to do menial work attempting.

1. That monies from these blood plasma centers is not reported on a 1099-Misc (AFAIK) is a question I would like answered.

Please be aware that I have indeed seen a case where an individual has $2000 of W-2 income and also, this blood plasma income. It is no stretch in my mind to imagine her scrambling weekly to find any meager wages from whatever menial task her body and limited education permit.

Thank you all for clarifying the issues here.

Continuous and regular does not have to mean frequent. If six times a year is all that you are allowed to do, I don't see that as being sporadic. Would you say that someone who sells Christmas trees isn't in business until he's done it for several years in a row, even though that is his intention from the beginning? I seriously doubt that would be the case.

In fact, I know of retailers who break even (if that) during the rest of the year and make all their profit during the Christmas season. Would you say that they are engaging in hobbies until they've shown that they have been in business for several years?

For a somewhat interesting case, see Green v. Commissioner, 74 T.C.

1229 (1980). There the taxpayer sold her plasma on the average of 15 times per year, and that was held to qualify for Schedule C treatment.

The more interesting argument was that income from the sale of blood products is non-taxable as analogous to payment for personal injuries. The court turned that claim down.

Stu

"Stuart Bronstein" wrote

See my second post. Folks are allowed to sell blood plasma a maximum of two times a week.

I was trying to identify a line where the IRS might rule this self-employment income was not sporadic. I'd feel good (for reporting as business income purposes) about someone who had sold plasma at least, say, 12 times over the year. The lesser it was, though, ISTM the more sporadic. The more gray it becomes. If donations for money were infrequent, I would either want to know that the taxpayer either was doing this year after year, or I'd like to see if s/he perhaps was performing "menial labor" (doing whatever s/he could with menial labor to make a living) continually and regularly and so qualifying as a business.

Don't get me wrong. I think most would agree folks who eke out a living using their bodies are "earning income." So they are ISTM meeting the intent of the EIC law. Being persuasive on the EIC and Schedule C (or C-EZ or SE) issues for tax return purposes is another issue.

Yup. I cited this case in my original post. Both the Green case and the Garber case involved income on the order of $100,000 and up, due to their both having rare blood. That's c. 1980 dollars.

If you report the income on Schedule C, you have to pay SE tax (which I'm sure the government does not mind), but you can also take deductions. I think if you were too creative with your deductions, then the IRS might object. You could for example deuduct the cost of mileage to get to and from the blood center. But deducting food and drinks (I guess your body needs those to manufacture blood) as an expense or cost of goods sold sounds a bit fishy; but then what if you ate some herbs to help replenish the blood quickly so that you could sell your blood more frequently and you wouldn't have taken this herb otherwise, then would the cost of this herb be deductible.

Why wouldn't that be commuting, non-deductible?

But they don't let you donate more often even if you take magic herbs, so I still don't think it would be deductible.

Seth

(balance snipped....)

mileage? no way. (that would be too creative!) The blood bank/plasma center is primary place of activity.

ChEAr$, Harlan Lunsford, EA n LA

You don't think he could claim a home office? I'd argue that the primary place of activity is where he ate his meals and replenished his plasma. The blood bank is just where it was delivered.

Stu

LOL!!! quite a chuckle there, Stu.

ChEAr$, Harlan

"Seth" wrote Regarding transportation to and from a blood plasma center--

would depend. In particular, the blood plasma center may not be a "regular or main job." I would welcome the citation from any person who feels otherwise.

If transportation expenses are not deductible, then for certain low income folks the fact that their business income may be higher will translate to a higher EIT credit.

Stuart, from my reading, I remain highly doubtful that one needs to alter their diet significantly, if at all, even if one donates plasma frequently. So I would not be looking to count food as a business expense for donating plasma.

I did not mean to imply that food would be deductible under these circumstances.

My understanding is that a place can qualify as a home-office for some purposes even if non deduction is allowed for rent (e.g. not used "solely and exclusively"). Since someone who sells plasma or blood actually produces it primarily at home, I'm merely suggesting that he might qualify for a home office for purposes of determining commuting expenses.

Harlan - yes, my suggestion was somewhat tongue-in-cheek. However I have seen courts do much stranger things, so (if I could justify it legally) I might actually make the argument in the right circumstances.

Stu

"Stuart Bronstein" wrote

Not to muddy the waters too much or drag this out, but truly to clarify: It is said in many places that the plasma centers are compensating for time and expenses, not the blood per se, as Han noted. Many states make it illegal to sell "bodily fluids." I personally would not dare push your idea or waste time pursuing it.

I did notice that the Schedule C instructions have a business code for "Other ambulatory health care services (including ambulance services, blood, & organ banks)." I am having a hard time imagining why blood banks is mentioned here unless the IRS is trying to cover SE income from plasma donations. Though in the case I have in mind, it's not an ambulatory blood bank but what I think is called a lab.

That's irrelevant. As a lawyer I deliver wills, trusts, contract and corporate documents to clients. Even though they get something tangible I charge no sales tax, because what they are compensating me for is my time and expenses, not for the specific piece of paper.

Stu

What about SE income as a nurse who sometimes works in one?

Seth

I have heard of enough RNs working extra jobs as nurses on a sort of catch-as-catch-can basis that I agree that the business code above might mostly be used by them.