Paypal has a loan from a loan company listed as income on my 1099 k and won't change it. Do I have to report it as is or can I deduct the loan amount?

[AmyT · Accepted solution]

You will be able to deduct the loan proceeds that are currently reported on your 1099-K as income.

It is very important that you report the full amount of 1099 income as shown on the form.  The IRS does have a matching program to ensure that all 1099s reported to them are included on the recipient's income tax returns. However, in a case such as yours, you should then treat the amount that was not actually income as a deduction.

In the Expenses portion of your Schedule C (Self-employed profit or loss), you should add Other miscellaneous expenses.  For the description, put in "Loan proceeds reported as income on 1099-K" and then enter the amount of the loan you received.