The 1099-K is INFORMATIONAL so not "copied" onto the Federal 1040.
With that said, the IRS does get a copy and may be looking to see how you report the income.
If this is gambling income, you can enter it (the winnings) under "Less Common Income" "Gambling Winnings"
The income will be reported on Schedule 1 line 8b and added to your 1040 line 8
It will be reported as "Gambling Income" but there will be no mention of the 1099-K.
Also, if the 1099-K only reports distributions, you would need to know how much you WON versus any adjustments for what you lost. You need to enter "winnings" and "losses" separately. Losses are not automatically subtracted from winnings.
You could also report the 1099-K as "Other Income" and list it as "PayPal 1099-K" and then enter a negative number to back-out your personal deposit so that the IRS would have a full explanation of the numbers reported on the 1099-K compared to what you claim on your 1040, but it really isn't required and it doesn't reflect how gambling winnings are treated.
If the 1099-K from PayPal is for gambling winnings, you'll need to report it as such and you'll need to know how much you won and how much you lost. If you won $150 yesterday and lost $200 today, you have 150 in winnings and 200 in losses, but you can only report losses UP TO the amount you won (150).
The loss is reported on Schedule A if you Itemize Deductions. If you take the Standard Deduction, the loss is, well lost.
So in the example, if you take the Standard Deduction, you would claim 150 as income and the loss would not be counted.
If gambling is your "trade" you report it on your Schedule C.
IRS LINK on gambling
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