If my small paypal business loan is counted as sales income on 1099 where can I deduct this income on Schedule C?

[ashnictho09]

I recieved a Paypal working capital loan in 2016. If it is counted as income on Paypal 1099k where can I deduct this amount and also can I deduct the fee asscociated with this loan which was $800?

[MichaelL1]

Loans are not counted as income.  

The fees paid to get the loan are deductible.  Yes the loan fee is deductible.

When you enter the expenses for the Sch C business. there is a Section called Business Expenses, and under that "Other Common Business Expenses" and then go to "Other Miscellaneous Expenses" and deduct the amounts here for the fees paid (which includes that $800).

[AngryatPaypal]

SAME HERE  2016 30k now I'm screwed stupid paypal needs to be sued! Now the irs just took my whole refund.  Paypal WILL NOT ADMIT THIS! BEWARE. Been fighting this since 2018. 

[AmeliesUncle]

PayPal is obeying the laws by reporting the electronic transactions.  They are not at fault.

You need to show the IRS that amount was not taxable income.

[AngryatPaypal]

Actually YES the irs is counting the loans as income! I just had to amend my 2016 tax return because paypal added my **bleep** loan to my 1099. Now my tax preparer is amending my 2017. I'm royally pissed! I have to pay back my refunds for those two years plus some. Also my 4k return was taken this year to pay for this! Not fair! My tax prep HR block has done extensive research on this and paypal won't admit it, but yes they do add the loan to your income. They need to be sued if you ask me! I'm screwed now because I'm trying to buy a home. If you get a cash advance from PayPal aka working capital it's added in as income. Because it's supposed to be used to purchase stuff for your business. Business expenses etc.

[ThomasM125]

What form was the loan receipts reported on? 

I assume the loan has to be paid back, if so then it is not income in my opinion.

[Critter]

Ok ... if PP is reporting the loan as income on the 1099-K form incorrectly and will not change it how it is reported then you must correct this on the Sch C yourself ... go ahead and add the loan in the income section then to an offsetting expense to negate that amount.  Who ever is amending the prior year returns should have already thought of this solution.   Then whatever you used the loan for (like inventory) will be naturally expensed in inventory or other expense.  Also the interest or fee paid for the loan is also deductible. 

[AmeliesUncle]

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@AngryatPaypal  wrote:

Actually YES the irs is counting the loans as income! I just had to amend my 2016 tax return because paypal added my **bleep** loan to my 1099. Now my tax preparer is amending my 2017. I'm royally pissed! I have to pay back my refunds for those two years plus some. Also my 4k return was taken this year to pay for this! Not fair! My tax prep HR block has done extensive research on this and paypal won't admit it, but yes they do add the loan to your income. They need to be sued if you ask me! I'm screwed now because I'm trying to buy a home. If you get a cash advance from PayPal aka working capital it's added in as income. Because it's supposed to be used to purchase stuff for your business. Business expenses etc.

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No.  A 1099-K Is NOT income.  It merely reports electronic transactions.  The IRS REQUIRES those electronic transactions (including the loan) to be on the 1099-K.

You just need to show the IRS what your actual income is.  Again, the amount on a 1099-K does NOT determine your income.

[AngryatPaypal]

I have to report exactly what's on my PayPal 1099 for my business income. If I do not irs comes back with penalties wondering why I'm not reporting the amount paypal send in that matches  the 1099. All my transactions are done through PayPal from my website. I use PayPal as my merchant. If they are wrong it doesn't matter, I still have to report that amount that they send in. I'm now having to amend my 2016 and 2017 because paypal morons added my PayPal working capital which is a cash advance into my 1099k. It's crazy! Paypal denies all allegations, but I can confirm my income doesn't match until I add those loans in for the year. I'm wanting to start a suit against paypal for this as they continue to lie and state that they don't add the loan into the 1099k when in fact they do. I'm having to pay back so much of my tax returns now and irs took my entire 4k refund because of paypal doing this.  It's ridiculous and I'm pissed

[KrisD15]

If the 1099-K includes the loan amount, follow the advice given above. Enter the 1099-K as it show, but also enter an offsetting entry to account for the loan. 

Although you have every right to be upset, the loan is not taxable income, so your refund (tax liability) should not change if you reported the taxable income only on your return. 

[AmeliesUncle]

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@AngryatPaypal  wrote:

I have to report exactly what's on my PayPal 1099 for my business income.

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NO, you do not.  You report your ACTUAL income.

If the IRS sends you a notice about it, then you just explain the situation, and show proof of what your actual income is. 

[Carl]

If the lender who is lending you the money is depositing what you borrow to your paypal account, then paypal is 100% correct in reporting the transaction. It "is" income that you received, regardless of who you received it from, or why they paid it to you. The "who" and "why" is not paypal's concern and never will be. You can sue all you want. But you will lose.

You need to report the gross amount exactly as entered in box 1a of the 1099-K. Understand that the gross amount is not the taxable amount. You have to take action to reduce the taxable amount, and only you can do that.

IN turbotax where you enter the gross business income, you have 4 data entry lines.

On the first line, enter the total business income received from all sources, including the total amount included in box 1a of the 1099-K.

That does it for the General Income section. Click Continue.

Now click the "income you gave back" button, call it what is is (such as "SBA Loan" maybe) and enter the amount of the borrowed money. Then click Continue.

Now click Continue again, and you'll see the amount next to "Business income" has been reduced by the amount of the borrowed money.