Anyone get 1099-K from PayPal with over $20,000 & 200 transactions?
Warning: For Full Access Please Log In or Create an Account (Free)
I am not in this situation, but this is what I would do if I was. First, report every form you received on your return. That way, nothing will be missing when the IRS compares forms. I would then subtract each aggregated duplicate payment as a business expense and in the description field, I would indicate exactly why (something like "payment was reported twice, once on Form 1099K issued by PayPal and again on form 1099-NEC from XYZ"
. If at some point in the future, the IRS questions you or asks you to do it a different way, the arithmetic will still be correct. I would strive for maximum transparency.
. If at some point in the future, the IRS questions you or asks you to do it a different way, the arithmetic will still be correct. I would strive for maximum transparency.Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008
I don't use my 1099s. I track everything in a spreadsheet and use that number. But if I did, obviously if the same income was reported in two 1099s, I would only report the income once.
IMHO, every 1099 that a shopper receives should be included on their income tax return. The IRS got the 1099 and is supposed to match them to income tax forms. They may or may not do a good job at matching, but in theory, they match each one. A "missing" (not reported) 1099 form would IMHO be a red flag for the IRS to ask why you hadn't reported the invome.
Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008
Turbo Tax recommends reducing the amount you fill in on the 1099k by the amount of any 1099misc that overlaps. As an aside, the tax programs don't actually transmit to the IRS what you enter for the 1099s. All they get are your income totals. The IRS is well aware there is overlap between the forms. You could also report the overlap as a deduction and that would work just as well, but you deduction to income ratio would then be higher and could possibly also be a red flag.
Edited 1 time(s). Last edit at 04/03/2022 06:45PM by mystery2me.
Edited 1 time(s). Last edit at 04/03/2022 06:45PM by mystery2me.
So you're willing to pay double taxes and 'lie' on your tax forms just to avoid an audit?
Take it from someone who has been through an audit, if you have accurate and organized documentation you are just fine. It's a pain in the @$$ to copy everything but it's truthful.
I did not make more than $20k via PayPal, but if I were in your position I would only report the income once.
Take it from someone who has been through an audit, if you have accurate and organized documentation you are just fine. It's a pain in the @$$ to copy everything but it's truthful.
I did not make more than $20k via PayPal, but if I were in your position I would only report the income once.
@myst4au wrote:
IMHO, every 1099 that a shopper receives should be included on their income tax return. The IRS got the 1099 and is supposed to match them to income tax forms. They may or may not do a good job at matching, but in theory, they match each one. A "missing" (not reported) 1099 form would IMHO be a red flag for the IRS to ask why you hadn't reported the invome.
I too would only report the income once. It seems to me that doing it twice and backing it out would cause more confusion to the IRS than necessary. I once had a pre audit telephone audit. I simply explained on the phone what the real situation was and the audit was over. My idea is keep it simple but keep good notes on exactly what happened as if you get questioned a year from now you may not remember all the details. And remember you are required to report income and pay tax even if you do not get any form of 1099 for incomes under $600.
Perhaps this is an opportunity to add a clarification to the reporting forms. Just as some of our reports have a space for anything not otherwise mentioned in the survey, the tax forms should have a space somewhere for situations like this. I believe that everyone should be able to report all 1099's as well as explain where they believe any duplication might exist. This shows awareness, might indicate a good faith effort, and allows the IRS to determine if there is/was any duplication. Providing all the forms along with the tax reporter's concern or perspective is better than unnecessarily giving any opportunity for the IRS to search for information. It creates the trail of information and thought processes that might help the tax reporter later. Can the tax forms, or the programming, be ready for this as soon as next year?
Nature does not hurry, yet everything is accomplished. - Lao-Tzu
Report the 1099-k which should only reflect your business transactions. Match the figure to your 1099-NECs/your records to confirm the 1099-k is correct. Include and report whatever income you made that did not require a company to send you a 1099-NEC i.e. under $600 (of course this figure would not be included in your 1099-k). That amount should add up to your 1099-k. Record keeping is paramount. Good luck. :-)
Edited 1 time(s). Last edit at 04/04/2022 05:15AM by Madetoshop.
Edited 1 time(s). Last edit at 04/04/2022 05:15AM by Madetoshop.
@mystery2me wrote:
I don't use my 1099s. I track everything in a spreadsheet and use that number. But if I did, obviously if the same income was reported in two 1099s, I would only report the income once.
The 1099s are reported on a cash basis meaning when you were actually paid so you might have December jobs not paid until January or February but the expenses associated is deducted when incurred. .
Good point. The 1099s will always report when the payments were made. I personally choose to use the accrual method of accounting, where I report income the year it was earned. That's one reason I ignore the 1099s because those numbers are on a cash basis. But if I did use the cash method of accounting, I could track when I received payments and still rely solely on my records to do my taxes.
In what way am I lying? In what way am I paying double taxes? I am not lying, and I am certainly not paying double taxes. What I do represents full disclosure to the IRS. I report everything when it comes to revenue and expenses.
@luckygirl0100 wrote:
So you're willing to pay double taxes and 'lie' on your tax forms just to avoid an audit?
Take it from someone who has been through an audit, if you have accurate and organized documentation you are just fine. It's a pain in the @$$ to copy everything but it's truthful.
I did not make more than $20k via PayPal, but if I were in your position I would only report the income once.
@myst4au wrote:
IMHO, every 1099 that a shopper receives should be included on their income tax return. The IRS got the 1099 and is supposed to match them to income tax forms. They may or may not do a good job at matching, but in theory, they match each one. A "missing" (not reported) 1099 form would IMHO be a red flag for the IRS to ask why you hadn't reported the invome.
Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008
Sorry, only registered users may post in this forum.