@emh1969 wrote:
The PayPal account is mine which is why it's registered to me. I use it for my business. My wife can't have a PayPal account because she's Colombian and PayPal doesn't operate in Colombia. So I send out the bills to her students from my account. The website domain for her business is registered in my name so technically her business is "mine". Normally this isn't a problem because we don't receive anywhere near the $20,000 level which triggers a 1099-K. Unfortunately, my address in PayPal was accidentally listed as Virginia which now has a $600 reporting limit which is why I received a 1099-K. (it should have been California).
"There are many situations where a 1099K might be issued for money that is not taxable, such as gifts received after an appeal for financial assistance. The IRS procedure in such cases is to file by mail, and attach a copy of the 1099K at a written explanation as to why it is not taxable income."
Okay good to know. Was hoping to avoid sending it by mail since I'm outside the US and would have to have a family member send it. Don't really want anyone seeing how much (or little) I make but I might not have a choice. 🙂
If you already have a schedule C business using the same PayPal account, you may be better off treating your wife as a subcontractor, at least for 2020 (if you have not filed yet), since this 1099-K includes your business income as well. However, I would be concerned that failing to withhold backup withholding could subject you to penalties and I think you should get professional advice. I would definitely set up a separate account for your wife's business as soon as possible and keep the funding separate.
