As I recall PayPal only issues 1099-K's when the amount processed is over $20K, and I'm pretty certain the IRS will try and match that to your income tax return.
There's a couple of things you might try:
- Don't report the 1099-K anywhere on your income tax return. There's always a chance that the IRS won't follow up about it and that will be the end of it. But if they do follow up then you write a persuasive letter, heavily backed up by documentation, telling the IRS that this wasn't YOUR money, you were simply acting as a conduit on behalf of the volunteer organization, (That's what I assume you were actually doing.) With that well-written, adequately documented letter that might - or might not - be the end of it.
- You can try documenting the "conduit" aspect of your activity in your income tax return by actually reporting the 1099-K in your income tax return in such a way that it doesn't affect your taxable income. One way of doing this could be as follows:
Start the "Miscellaneous Income, 1099-A, 1099-C" interview down at the bottom of the "Your 2017 Income Summary" page.
Start the "Other reportable income" interview.
On the page "Any Other Taxable Income?" click YES.
On the page "Other Taxable Income" ignore the "Do NOT enter income reported on Form 1099-MISC" warning and enter a description, e.g., "1099-K issued to me as nominee for {NAME OF VOLUNTEER ORG}", and the dollar amount.
Go back and start the "Miscellaneous Income, 1099-A, 1099-C" interview again, following the same path, and enter a description, e.g., "1099-K amount nomineed to {NAME OF VOLUNTEER ORG}" and a NEGATIVE amount.
That will get the 1099-K and it amount reported on the face of your income tax return, it will explain, briefly, what went on here, but the net of the two amounts will be $0.
Tom Young
