Tax Questions About Claiming Plasma Donation Income and IRA Withdrawals

Thanks for the response! For the plasma donations, does that mean I should keep track of every single payment I get, even if it's only like $50 here and there? I thought there might be some minimum like with the $600 for 1099s. For the IRA, how much extra should I withhold to be safe? Like if I think I'm in the 22% bracket, should I just do 25% or something?

Yes, you should keep track of every payment you receive for plasma donations, even the small ones. While the $600 threshold determines whether a company must send you a 1099, it doesn't determine whether income is taxable. All income is taxable regardless of amount. For your IRA withdrawal, withholding 25% when you think you're in the 22% bracket would be a reasonable approach. This gives you a small cushion without overwitholding too much. Remember that the withdrawal itself might push you into a higher bracket depending on the amount, so having that extra cushion is smart.

Did you need to provide any documentation for the plasma donations? I've been doing it for about 6 months but haven't kept any receipts. The company pays me on a prepaid card.

How accurate was their tax bracket calculation? I'm always skeptical of online tools getting that right since they don't know all my deductions and credits.

You don't technically need receipts, but I highly recommend keeping some form of documentation. What I did was take screenshots of my payment history in the plasma center's app, and that worked fine. The IRS just wants to see that you're making a good-faith effort to track and report your income. Their tax bracket calculation was surprisingly accurate. I uploaded my last paystub and answered some questions about other income sources, and it was only off by about $200 from what my actual tax liability ended up being. The tool also let me play around with different withholding amounts to see how they would affect my refund or amount owed.

Wait, so this service actually gets you through to a real IRS person? How does that even work? The last time I tried calling them I gave up after being on hold for like 2 hours.

Yeah right, sounds like a scam to me. Why would I pay someone to call the IRS when I can just do it myself for free? I bet they just tell you the same generic info you can find on the IRS website.

It's not complicated - they have a system that basically waits on hold for you and calls you back when an actual IRS agent picks up. It saved me from being stuck on hold for what would have been over 3 hours according to their system. No, it's definitely not a scam. The value is in your time saved. I was able to ask specific questions about my situation with plasma donations across multiple centers and got clear guidance on how to report it from an actual IRS representative. They answered questions about my specific situation that weren't covered in the generic info online.

That's really helpful, thanks! Do you happen to know if plasma donation money affects things like tax credits? I'm getting education credits this year and I'm worried the extra income might reduce them.

Yes, the plasma income could potentially affect your education credits. Since it increases your adjusted gross income (AGI), it might reduce your American Opportunity Credit or Lifetime Learning Credit if you're near the income phaseout thresholds. The same goes for other income-based credits like the Earned Income Credit. It's always best to report everything accurately and let the tax forms calculate the proper credits.

There are some exceptions to that 10% penalty though. If you're using the money for first-time home purchase, certain medical expenses, higher education, or if you've become disabled, you might avoid the penalty. Worth looking into before you withdraw!

That's a really smart approach with the notes app! I never thought about doing it right after each donation - I always told myself I'd remember later and then forgot half the time. The partial withdrawal idea is brilliant too. I'm actually in a similar situation where I need money from an old IRA but I'm worried about getting pushed into a higher bracket. How much would you recommend for a "test" withdrawal to see the tax impact? Like is there a sweet spot amount that won't drastically change your bracket but gives you enough info to plan the rest?

@Omar Zaki For a test withdrawal, I d'suggest looking at the tax bracket thresholds first. For 2024, if you re'single, the 12% bracket goes up to $47,150 and the 22% bracket starts at $47,151. If you re'married filing jointly, 12% goes to $94,300 and 22% starts at $94,301. I d'recommend withdrawing an amount that keeps you well within your current bracket - maybe $5,000-$10,000 as a test if you have room. This gives you real data on how the withdrawal affects your overall tax situation without pushing you over a bracket threshold. Plus, you can see exactly how much gets withheld and compare it to what you actually owe when you file. The key is knowing your current income and where you sit relative to the bracket cutoffs. If you re'already close to a bracket boundary, even a small withdrawal could bump you up, so definitely factor that in!

This is really smart advice about adjusting paycheck withholdings to balance out the IRA withdrawal withholding! I never thought about using that strategy to avoid giving the government an interest-free loan while still staying covered on taxes. One question about the quarterly payments - if someone like @Amina Toure is just starting with plasma donations this year, at what point would they need to start making quarterly payments? Is there a threshold where the IRS expects you to pay quarterly instead of just settling up at tax time? I m'wondering if plasma donation income alone would trigger that requirement or if it depends on your total tax situation. Also, does anyone know if the plasma centers report the payments to the IRS even when they don t'issue a 1099? I m'trying to figure out if there s'any automatic tracking happening on their end or if it s'really just on us to self-report everything accurately.