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Melkor
Level 1

Willl I have to pay taxes on payments sent via paypal freinds and family?

Before we created a joint account my wife would sent me her portion of the monthly bills via PayPal. These transfers often were far above the $600 threshold.

Am I going to be taxed on these?

What about my wife sending her mother monyt via PayPal when she picks up medications for us on her way over to visit? These will total over 600 by years end. Will she have to pay taxes on something like this?

4 Replies
Bsch4477
Level 15

Willl I have to pay taxes on payments sent via paypal freinds and family?

Tax law has not changed. Those activities are not taxable events. 

Melkor
Level 1

Willl I have to pay taxes on payments sent via paypal freinds and family?

So even though I have transactions above $600 total, these will not cause a 1099-K to be issued? The law has changed hence why they had the open forum.

Bsch4477
Level 15

Willl I have to pay taxes on payments sent via paypal freinds and family?

PayPal Friends and Family transactions will not be included in the commercial transactions that are notified to the IRS.

The law change is directed at payments for a business. 

Opus 17
Level 15

Willl I have to pay taxes on payments sent via paypal freinds and family?


@Melkor wrote:

So even though I have transactions above $600 total, these will not cause a 1099-K to be issued? The law has changed hence why they had the open forum.


According to a different post, PayPal will only issue 1099-Ks for business accounts and not personal accounts.  I have not checked to see if this is true.  If you do get a 1099-K, that doesn't mean the money is taxable, but you do have to deal with the 1099-K.  There are 2 procedures you can use.  

1. Leave the 1099-K off your return.  File by mail and include a written explanation of why you left off the 1099-K.

2. Enter the 1099-K as "other income."  Then create a negative item of other income to offset the 1099-k.  The IRS may as later for an explanation of the negative item, you would reply with a letter of explanation and a copy of your records.  

 

The IRS may or may not create a new procedure for 2022 since so many more people will be getting 1099-Ks.  We haven't seen the forms and instructions for 2022 yet. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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