I got a PayPal 1099-K for mostly personal transactions. How do I handle this?

Forum|Forum|3 years ago
March 4, 2023
2 replies
3 views

This year I received a 1099-K from PayPal for $1,297 in transactions. The vast majority of these transactions were personal: reimbursements from friends/family for stuff I paid for, and a few small cash gifts. There *are* a couple class action settlement payments included, which count as taxable income. But the 1099-K lumps it all together.

I've read about 10 different posts and articles on how to navigate the 1099-K thing this year and I still have zero clue as to how I go about handling this: especially since my 1099-K includes a majority of PayPal transactions that are not taxable, but a couple of small ones that are. What makes it even more complicated is that I happen to be self-employed, but none of these transactions (including the taxable ones) were related to my business.

Any advice is greatly appreciated.

ErnieS0

Level 15

Here’s how to enter a Form 1099-K in TurboTax when some items are reimbursements, gifts or personal items sold at a loss while a few are taxable income:

Type 1099-k in Search (magnifying glass) in the upper right
Tap Jump to 1099-k
On “Did you get a 1099-K?" say Yes
On “Choose which type of income your 1099-K is for," select Personal item sales
On “Let’s get the info from your 1099-K," fill in boxes, then Continue
On “Personal Items Sales,” select Enter the total proceeds for items sold at a loss or no gain in the box. Enter the total value of non-taxable transactions. This number should be less than Box 1a of Form 1099-K.

Learn more at Form 1099-K Frequently Asked Questions: General.

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mileswhowardAuthor

Level 2

Thanks for the response. I tried taking these steps but when I selected "personal sales items" as the basis of the 1099-K, the form was categorized under Investments and I'm now being told to enter what's essentially investment sale information for every personal transaction that's lumped into the 1099-K total, which I can't really wrap my head around because these personal transactions are either direct reimbursements for stuff I paid for (ie, dinner out with friends) or some small cash gifts from friends or family.

JamesG1

Level 15

You may consider reporting the 1099-K as Hobby Income.

To report Hobby income, follow these directions.

Down the left side of the screen, click Federal.
Down the left side of the screen, click Wages & Income.
Click Show more to the right of Other Common Income.
Under Your income and expenses, click the Edit/Add button to the right of Form 1099-K.
At the screen Did you get a 1099-K? click Yes.
At the screen How would you like to enter your 1099-K? click Type it in myself. Click Continue.
At the screen Choose which type of income your 1099-K is for, select the button for Hobby income. Click Continue.
At the screen Let’s get the info from your 1099-K, enter the information. Click Continue.
Click the box The amount in box 1a is too high.....

At the screen Your 1099-K summary, notice that the income relates to ‘Hobby’. Click Done.

The entry will be reported:

on line 8j of Schedule 1 of the Federal 1040 tax return, and
on line 8 of the Federal 1040 tax return.

Hobby income expense is not allowed to be reported.

@mileswhoward

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rhomett

Level 2

I am looking into starting a class action against them after trying for weeks to get them to remove the goods and services classification from an insurance payment I received from Traveler's (reimbursement for money we spent literally 2 years ago), and they are unable to and said they will be issuing me a 1099-K no matter what. BoA/Traveler's tried to recall the payment AS PAYPAL suggested and PayPal corporate told them it was too late, the payment had already went through successfully (even though PayPal had a hold on it because we never supplied a Tax ID because we ARE NOT SELLERS of any kind!). They also would not give me the option to send it back so it is sitting there unclaimed because I refuse to accept it and get a 1099-K for it as goods and services because Paypal automatically categorizes business payments as goods and services! I am certain this has happened to thousands of people and many have probably had to pay extra to file their taxes and pay a tax expert to help them navigate it. Please reach out if you would like to try and help me find people for a class action. I have literally lost sleep over it and it has ruined and consumed my life over the past few weeks, as it is FAFSA time too.