A question on the 1099's

Can PayPal and the MSC both send you a 1099? If they do, will that confuse the IRS?

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They are not supposed to. Could it happen? Anything is possible. I can't see an MSC incurring the additional cost. Would it confuse the IRS? Yes. Solution? Your good records including how you were paid.

Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008

The taxpayer's individual, WRITTEN, CONTEMPORANEOUS records have to be accorded great deference by the IRS. The LAST place to cut any corners is with your own record-keeping.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.

If PayPal sends you a 1099, will it be on your total earnings? Will they only report MSC's that pay you more than $600? I just see some confusion happenings. If PayPal sends you a 1099, the MSC shouldn't have to. How would you report two 1099's? This is going to be interesting. Another thought, much of my earnings are on reimbursements. PayPal would have to report that on the 1099. Reimbursements are not taxable. Or will they become taxable?

Edited 2 time(s). Last edit at 05/30/2022 08:11PM by johnb974.

Reimbursements are not taxable. YOUR records of what was a reimbursement will be ESSENTIAL. Just bang that into your skull and you will be fine.

Based in MD, near DC
Shopping from the Carolinas to New York
Have video cam; will travel

Poor customer service? Don't get mad; get video.

My understanding is that PayPal will send you a 1099 form for the total amount that is disbursed to you. They are unlikely to have access to the information about fees vs reimbursements. As I read the IRS regulation, the 1099 form includes the total amount. This includes any payments someone sends you if you sell them something. It will be up to the taxpayer to sort everything out. I have been reporting total sums received from an MSC (fees + reimbursements) as revenue and then deducting reimbursement as expenses. This would work for the upcoming PayPal 1099 forms, but it might not be the optimal way.

As has been pointed out, the shoppers who have been careful to stay under $600 with every MSC in the belief that not getting a 1099 form is a way to avoid paying taxes ("the IRS doesn't know about the money they sent me" ) are in for a surprise for those MSCs which use payment processors (such as PayPal) for payments.

@johnb974 wrote:

If PayPal sends you a 1099, will it be on your total earnings? Will they only report MSC's that pay you more than $600? I just see some confusion happenings. If PayPal sends you a 1099, the MSC shouldn't have to. How would you report two 1099's? This is going to be interesting. Another thought, much of my earnings are on reimbursements. PayPal would have to report that on the 1099. Reimbursements are not taxable. Or will they become taxable?

Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008

Edited 2 time(s). Last edit at 05/30/2022 10:58PM by myst4au.

We'll just have to wait and see how this plays out. It seems they are going after the poor and middle class again.

Always! It is much harder for those of us that fit into that class to defend ourselves against big business (in this case, the IRS). Just as @walesmaven stated, keep detailed records of all expenditures and if you happen to get audited you will have proof of everything.

@johnb974 wrote:

We'll just have to wait and see how this plays out. It seems they are going after the poor and middle class again.

The MSCs send a 1099-MISC listing what they paid you. PayPal sends a 1099-K listing how much they passed through to you.. There should be no confusion.

And if you don't keep your own records of how much was fee and how much was reimbursement, yes, you could be taxed on the full amount. The burden of proof is on you.

1099s don't need to be attached to your 1040. So you can attach either one (whichever is more accurate) or none. Your own records of what are fees and what are reimbursements are what you report--but they need to be accurate and match, or close to it, the 1099s (PayPal or the total of the ones you get from the MSCs).

I used to count all incoming $$ as revenue, then deduct all expenses (including reimbursed amounts). But it seems that a lot of MSCs report the two separately, so I think I'm going to just start counting fees and only deduct required expenses above the reimbursements. I haven't done my 2021 taxes yet, so I need to look and see what's what. I didn't earn enough to get any 1099s last year, but I will this year, so it'll be good to have a plan in place for this year's taxes.

I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.

1099 forms are submitted (generally electronically these days) directly to the IRS by the company that issues them. Each one has your SSN or EIN associated with the payment, so the IRS can easily match them up to your tax return.

Shopping Southeast Pennsylvania, Delaware above the canal, and South Jersey since 2008

@myst4au wrote:

1099 forms are submitted (generally electronically these days) directly to the IRS by the company that issues them. Each one has your SSN or EIN associated with the payment, so the IRS can easily match them up to your tax return.

Which is also why you don't need to send them in with your return. And, yes, the IRS can match the 1099 to your return, so they'd better match up! LOL. People who don't report their SE/gig income are running a risk. That old "If it's not over $600, they won't catch me" is nonsense (always was, but even more so now).

I learn something new every day, but not everyday!
I've learned to never trust spell-check or my phone's auto-fill feature.

This happened to me with my 2021 taxes because New Image sent me a 1099-MISC. By the way, that PayPal 1099-K also includes cash back website payments and other things that are clearly not taxable income.

I use Turbo Tax, I hope they also help with this. I always file online.

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A question on the 1099's

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