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Returning Member
posted Mar 4, 2023 2:28:53 PM

I got a PayPal 1099-K for mostly personal transactions. How do I handle this?

This year I received a 1099-K from PayPal for $1,297 in transactions. The vast majority of these transactions were personal: reimbursements from friends/family for stuff I paid for, and a few small cash gifts. There *are* a couple class action settlement payments included, which count as taxable income. But the 1099-K lumps it all together.

I've read about 10 different posts and articles on how to navigate the 1099-K thing this year and I still have zero clue as to how I go about handling this: especially since my 1099-K includes a majority of PayPal transactions that are not taxable, but a couple of small ones that are. What makes it even more complicated is that I happen to be self-employed, but none of these transactions (including the taxable ones) were related to my business. 

Any advice is greatly appreciated.

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3 Replies
Expert Alumni
Mar 4, 2023 4:42:06 PM

Here’s how to enter a Form 1099-K in TurboTax when some items are reimbursements, gifts or personal items sold at a loss while a few are taxable income:

 

  1. Type 1099-k in Search (magnifying glass) in the upper right
  2. Tap Jump to 1099-k
  3. On “Did you get a 1099-K?" say Yes
  4. On “Choose which type of income your 1099-K is for," select Personal item sales
  5. On “Let’s get the info from your 1099-K," fill in boxes, then Continue
  6. On “Personal Items Sales,” select Enter the total proceeds for items sold at a loss or no gain in the box. Enter the total value of non-taxable transactions. This number should be less than Box 1a of Form 1099-K.

Learn more at Form 1099-K Frequently Asked Questions: General.

Returning Member
Mar 4, 2023 5:23:59 PM

Thanks for the response. I tried taking these steps but when I selected "personal sales items" as the basis of the 1099-K, the form was categorized under Investments and I'm now being told to enter what's essentially investment sale information for every personal transaction that's lumped into the 1099-K total, which I can't really wrap my head around because these personal transactions are either direct reimbursements for stuff I paid for (ie, dinner out with friends) or some small cash gifts from friends or family. 

Expert Alumni
Mar 5, 2023 5:13:55 AM

You may consider reporting the 1099-K as Hobby Income.

 

To report Hobby income, follow these directions.

 

  • Down the left side of the screen, click Federal.
  • Down the left side of the screen, click Wages & Income.
  • Click Show more to the right of Other Common Income.
  • Under Your income and expenses, click the Edit/Add button to the right of Form 1099-K.
  • At the screen Did you get a 1099-K? click Yes.
  • At the screen How would you like to enter your 1099-K? click Type it in myself.  Click Continue.
  • At the screen Choose which type of income your 1099-K is for, select the button for Hobby income.  Click Continue.
  • At the screen Let’s get the info from your 1099-K, enter the information.      Click Continue.
  • Click the box The amount in box 1a is too high.....

 

 

 

  • At the screen Your 1099-K summary, notice that the income relates to ‘Hobby’.  Click Done.

 

The entry will be reported:

 

  • on line 8j of Schedule 1 of the Federal 1040 tax return, and 
  • on line 8 of the Federal 1040 tax return.

 

Hobby income expense is not allowed to be reported.

 

@mileswhoward