@RedhairMac
@mkbrenner
@Donna F 77
We have to keep separate the concept of taxable income and reportable transaction.
The payment processor is required to report payments. They report the entire amount of payments, if the annual total is more than $600.
However, reported payments are not automatically taxable income. Whether a payment is taxable income depends on what the payment is for. Under the new rules, the IRS is going to want to see some description of what the payment is for and whether or not is it all taxable, partly taxable or not taxable at all.
Gift from family and friends are never taxable. If the processor reports them to the IRS, the IRS is going to look at your return to see if you provided an explanation. We don't know yet if the IRS will create a new procedure since so many more people than before will be getting a 1099-K. There were two old procedures that could be used.
a. Leave the 1099-K off, file by mail, and attach a written explanation.
b. Include the 1099-K as "other income", then create a negative 1099-K to remove any part that was non-taxable (like gifts).
You need to keep records in case the IRS sends you a letter asking for more details.
If you are selling goods, that is an entirely different question, because the gross proceeds that go through the payment processor is not necessarily the taxable amount, which depends on the type of business or hobby, the cost of the goods, and other factors. But that's a subject for a much longer post.
