Also, you need to respond to the IRS office that sent you the notice within the deadline specified by that letter or else you may lose your right to appeal. Make sure you respond directly to the IRS notice in addition to filing any other fraud reports with the IRS. If they sent you a CP 2000 notice, then they are asking you to tell them about your business activities. The IRS knows that even with a legitimate 1099K, it is not all taxable income, but it must be reported as business income along with any expenses. In your case, you should reply with a letter explaining that you did not have business activities, that you are not a PayPal vendor, and that you believe this is an instance of identity theft. You may wish to include copies of any police reports or other IRS fraud
reports that you have filed.
