1099-K from PayPal (tax form)

Can we please, please stay on topic?

@rodman99999  —- can you please elaborate? I am definitely a business, not doing this for profit, I am losing money.

It has to be something else. Maybe a “hobby” thing, section, on TT, or something else. I cannot possibly see how I will have to pay taxes on something I did not make money from.

Agreed!! 😂

@jetter —- thanks!

Which sentence are you talking? This one?

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If your Form 1099-K is for casual one-time sales and is not a business or even a hobby with recurring income (this can include income from PayPal, Square Card reader, or other electronic payments)  enter the income in TurboTax by going to Misc Income and selecting the last option. Enter the description as income from 1099-K and the amount.

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I am definitely not a “business”

@lalitk —- me too, and never had received one before either.

I guess this was the first year that I met both those criteria (over $20K in PayPal payments, I had ~$27K, AND 200 or more transactions). I cannot believe it 🤭😂

I received a nice answer on TurboTax forums:

https://ttlc.intuit.com/community/taxes/discussion/1099-k-from-paypal/00/1822466

It should be straight forward. I am not ready to do my taxes yet, as I have not received all tax forms for the year.

I will also put together a spreadsheet with all items sold via PayPal, along with cost and original purchase details, just in case I am audited. I think I have all the purchase info, either PayPal purchases, or dealers’ invoice / receipts. It will take some time and effort, but doable.

The key on this seems to be the definition of “business” vs “hobby”, and this is definitely NOT a business for me. Certainly a money losing hobby. It should be easy to prove it to IRS in case of an audit.

I just compiled a list of all payments received with PayPal during 2020. Including the PayPal friend & family, some not even related to Audio at all (just real friends and family stuff), I had received a total of 48 payments. Definitely NOT two hundred. I don’t know why they issued me a 1099-K. Some of my sales (3-4) was really large, components stuff, so yes, I received over $20K, but I thought it was payments over $20K, AND over 200 payments received.

And I am definitely NOT a business. Why do I have to make up such story?

As for the “invoice” thing, I only had sent 6 invoices, those who asked me to over at USAM.

Anyways, thanks all for chiming in. I will figure this out. It’s just going to take time and effort I was not prepared to have.

Ah!! I figured out why I received this tax form although I was far from meeting IRS threshold in transaction numbers:

https://www.paypal.com/us/smarthelp/article/i-live-in-vermont-or-massachusetts,-what-are-the-form-10...

I live in one of these states.

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Why did I receive a 1099-K if I didn’t meet the IRS reporting threshold?

Some states (VT, MA, VA, IL, MD) have reporting obligations at a threshold lower than the federal reporting thresholds:

• Vermont, Massachusetts, Virginia, and Maryland: $600 USD in gross payment volume from sales of goods or services in a single calendar year regardless of the number of transactions.

• Illinois: $1,000 USD in gross payment volume from sales of goods or services in a single calendar year with at least 3 payment processed.