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Returning Member

1099-K from PayPal leading to a CP2000 notice from IRS

Hi we used the method mentioned here for my son's return (putting a negative offset for a 1099K he got from Paypal for reimbursements sent to him via P2P transfers - he did a lot of shopping for us and relatives during covid) and my son now just received an IRS CP2000 form saying they did not see the income on his return (along with a missing $13 1099 from a bank we apparently never got but is correct).   


I looked at his tax return and I do see the amounts but they show under "Additional information from your 2021 Federal Tax Return" and then "Schedule 1: Additional Income and Adjustments to Income
Other Income Continuation Statement" which has me thinking the IRS did not see this via their automated system.  


Other than just sending them a letter explaining the 1099K was not actual income but was reimbursement for expenses should we do anything else (we will tell them the $13 is correct and apologize for missing that)?  I found another blog that suggested filing a schedule C instead of reporting as adjustments to income?  



2 Replies

1099-K from PayPal leading to a CP2000 notice from IRS

follow the cp2000 instructions which may require an amended return for the $13. include an explanation about the 1099-K (note what was suggested in the other Turbotax thread is only if you can't get a corrected 1099-K, see below, but the IRS prefers that he try to get a corrected one. then he would have correspondence to back up the claim). Here's is what the IRS says.

What Shouldn't Be Reported on Form 1099-K

Money you received from friends and family as a gift or reimbursement of a personal expense should not be reported on a Form 1099-K.  These payments aren't taxable income. Be sure to note these types of payments as non-business when possible in the app.

Take these steps if you receive a Form 1099-K in error

If You Get a Form 1099-K in Error

You may get a Form 1099-K in error when the form:

  • Reports payments that were gifts or reimbursements from family or friends

If this happens:

  • Contact the issuer immediately – see FILER on the top left corner of Form 1099-K
  • Keep a copy of the original form and all correspondence with the issuer for your records

Take these steps if you can't get a corrected Form 1099-K.

If You Can't Get a Corrected Form 1099-K (he did this, but did he try to get a corrected 1099-k)

Report the amount on Schedule 1 (Form 1040), Additional Income and Adjustments to Income.

Example: You receive Form 1099-K for $650 your roommate sent you for their share of rent.

On Schedule 1 (Form 1040):

  • Enter the error on Part I – Line 8z – Other income: "Form 1099-K received in error, $650"
  • Adjust it on Part II – Line 24z – Other adjustments: "Form 1099-K received in error, $650"


never use schedule C in this situation. 

Returning Member

1099-K from PayPal leading to a CP2000 notice from IRS

Thanks.  I know PayPal will not fix it, I've seen tons of complaints that you cannot get a person to even talk to, and if you do they are unable to do anything.  Thanks for the response about Sch C - glad to know I should not mess around with it.  

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