1099-k

[cspyon]

Hi

My student daughter received a 1099-K statement from PayPal, but she can't find it in the Turbotax free e-file section while working on her W-2 form there. 

It says something like this:

"You don't need to create a separate entry for your 1099-K info in Turbotax because your 1099-K income should be already included in other income, such as your self-employment or rental income."

She is working for a pizza company as a part-timer during the weekends, and that's why she received the W-2 form. Her work is not self-employment, right? Any help?

[LenaH]

It depends. Why did she receive the 1099-K? 

She would have gotten a 1099-K if she received payments:

• From payment card transactions (e.g., debit, credit, or stored-value cards), and/or
• In settlement of third-party payment network transactions above the minimum reporting thresholds as follows:
  • For returns for calendar years prior to 2022:
    • Gross payments that exceed $20,000, AND
    • More than 200 such transactions

[cspyon]

She sold about $660 on an auction site, and got paid through PayPal. 

So she doesn't have to report it?

[LenaH · Accepted solution]

Since the 1099-K is reported under her social security number, then it has to be included on her tax return. However, since it is not income (I'm assuming these were sales of personal items), you then have to subtract that amount from her return. By doing this, these amounts will net out to zero and there will be no tax effect to her. She cannot deduct a loss from selling personal items. 

To report and offset the cost, please follow these steps:

1. From the left menu, go to Federal.
2. Scroll down to the last option, Less Common Income, and Show more.
3. Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start.
4. Choose the last option, Other reportable income and Start and Yes.
5. Enter the applicable description and amount and Continue.
   • First, enter Form 1099-K as received. It is essential that the full amount be entered.
     • For a description, include Form 1099-K and Personal Property Sales.
   • Next, enter an adjustment to reflect the cost of these items as an offsetting, negative amount up to the amount of the income. 
     • For the cost description, include Cost of Personal Property 
     • In other words, if the goods cost you $100 and Form 1099-K was for $10 in sales, the maximum cost allowable would be $10.

@cspyon

[cspyon]

My daughter did, as you instructed, but Turbo tax keeps requiring her to upgrade to Deluxe.

Even if I click Other reportable income, I can't go there because Turbo tax won't let her, requiring her to upgrade. Based on the refund estimated by Turbotax, she will receive $100 in state refund. That's all.

Her W-2 form is pretty simple, except for her auction sales of $660.

Any advice?

[ColeenD3]

Yes, if she is required to upgrade to include the form, then she must upgrade. Not everything is available on the free program. She needs to report the 1099-K.

[cspyon]

Ooops, she already filed the return by using a free e-file, under the 1099-Misc income instead of 1099-K,

and paid $26 in federal tax! Any problem?

[JillS56]

Now that she has already e-filed she cannot change anything without an amendment.   An amendment should not be filed until she knows that her original return has been processed.  

Whether or not she owed the tax would depend on following the instructions provided to you by  @LenaH and @ColeenD3.  

[cspyon]

Fortunately IRS accepted her return!