How do I handle a 1099-K from PayPal with several different items in it (including non-taxable)?

[KathrynG3]

This can be handled in TurboTax by reporting Form 1099-K in Wages & Income under Miscellaneous Income, 1099-A, 1099-C. This is the location to also report the appropriate reductions.

To do this in TurboTax, follow these steps:

• From the left menu, go to Federal and select the first tab, Wages & Income
• Add more income by scrolling down to the last option, Less Common Income, and Show more
• Scroll down to the last option, Miscellaneous Income, 1099-A, 1099-C and Start
• Choose the last option, Other reportable income and Start and Yes
• Enter the applicable description and amount and Continue
  • First, enter Form 1099-K as received. It is essential that the full amount be entered.
  • Next, you can enter in each adjustment separately for your gambling winnings, eBay sales and each of your other adjustments as negative amounts. This will effectively reduce Form 1099-K and satisfy the IRS that Form 1099-K was reported as received.
• At Other Miscellaneous Income Summary, on the left side below the list, click + Add Another Income Item

[KathrynG3]

1. Yes, you are correct that you can zero out the income with the cost of the used items, but the reduction is only allowed to the extent of the earnings. 

2. Not exactly. Actually, gambling losses are only deductible if you itemize and only to the extent of winnings. Since you are properly reporting the gambling winnings in full, only subtract $1,000 here from the Form 1099-K with the explanation that it is already included elsewhere in the return, such as "Reported on W-2G in full." 

To report gambling winnings and losses, follow these steps once you are at Wages & Income.

• Scroll down to the last category, Less Common Income
• Gambling Winnings  and Start
• Follow the interview and report the winnings and Continue
• Report the losses on the next screen, Let us know if you had any gambling losses in 2020

  You can deduct gambling losses as an itemized deduction up to the amount of your gambling and prize winnings. and select Done

[Raiofhope]

Thank you. I think there are a lot of us that are going to have this problem this year. And, I will be closing PayPal. You can now transfer gambling winnings straight to your bank account. 

[LeonardS]

It is important that you report the information on your 1099-K.  The IRS receives a copy of your 1099-K and will take action if you do not report the 1099-K on your tax return.

You may report any items on your 1099-K that are not related to business activities such as payments to friends and family, coffee & donuts from the local store, payments to local stores, etc., as other income. 

 You will need to make two entries for your non-business items; one as a positive amount to show the personal items reported on the 1099-K, the second as a negative value.  This reports the personal 1099-K items and removes them from being taxable income. 

To enter your personal 1099-K items sign in to your TurboTax account if it is not open and follow these steps:

1. Select Income & Expenses.
2. Scroll down to Less common income and select show more.
3. Scroll to the line Miscellaneous Income, 1099-A, 1099-C, and check start.
4. On the page Let's Work on Any Miscellaneous Income scroll to the line Other reportable income and click start.
5. On the page Any Other Taxable Income select yes.
6. On the page, Other Taxable Income enter a description indicating Personal 1099-K and amount.
7. Select continue.
8. Select done on the next page

Repeat the above steps again this time in step 6 add the amount as a negative value

This will report your personal 1099-K items and remove them as taxable income.  Any remaining amount will be reported as business income.

@Raiofhope

[tommyboyjr23]

Hello....

I am in this same situation but i have a question. I received a w2g for winnings exceeding $1200. Since these winnings were included in the amount of the 1099K do I subtract them from the amount since they will be reported on in the W2G section or do I still put the full amount of the 1099K and negative out the full amount?

Thanks,

[LeonardS]

It is important that you report the information on your 1099-K.  The IRS receives a copy of your 1099-K and will take action if you do not report the 1099-K on your tax return.

You may report any items on your 1099-K that are not related to business activities such as payments to friends and family, coffee & donuts from the local store, payments to local stores, etc., as other income. 

 You will need to make two entries for your non-business items; one as a positive amount to show the personal items reported on the 1099-K, the second as a negative value.  This reports the personal 1099-K items and removes them from being taxable income. 

To enter your personal 1099-K items sign in to your TurboTax account if it is not open and follow these steps:

1. Select Income & Expenses.
2. Scroll down to Less common income and select show more.
3. Scroll to the line Miscellaneous Income, 1099-A, 1099-C, and check start.
4. On the page Let's Work on Any Miscellaneous Income scroll to the line Other reportable income and click start.
5. On the page Any Other Taxable Income select yes.
6. On the page, Other Taxable Income enter a description indicating Personal 1099-K and amount.
7. Select continue.
8. Select done on the next page

Repeat the above steps again this time in step 6 add the amount as a negative value

[Tee99]

I received both W2G and 1099k. All of winnings when through PayPal. I don't want to be taxes twice. I already added my w2g on my taxes which includes the winnings on my 1099k.  I don't want to be tax twice. 

Please advise? Thx inadvance.

[RaifH]

You will want to enter both forms into your tax return just as they have been reported to you. You enter the 1099-K and Form W-2G in Less Common Income following the steps @LeonardS outlined above. 

After you have entered both forms in their entirety, you can enter a negative value in the Miscellaneous Income section of Less Common Income for the amount reported on your W-2G. That way it is only being taxed once. It will be reported once on your W-2G, once on your 1099-K, and then one of those will be subtracted from your taxable income by entering the value as a negative in Less Common Income. 

@Tee99

[Goldengil7]

I found this answer very helpful. I have recently started online sports gambling in 2022 and I deposited I bet $1,000 and won $3,500. I did this all on draftkings, and have a current account value of $3,500 on draftkings. Therefore I have profited $2,500. I am concerned to withdraw the money with PayPal because I've heard of the outrageous tax circumstances people have gotten into. But based on what you're saying, should I receive a W2G from draftkings saying I made $2,500 and a 1099-K from PayPal saying I made $3,500. Based on the information you provided, shouldn't I be able to withdraw with PayPal and not be taxed on both the $3,500 and the $2,500?

[Vanessa A]

Whether or not you withdraw this, you need to include it on your return and yes, you will only be taxed on the amount once, not twice.  These are realized winnings, this is not like the stock market where you invest and let your money grow.  

Gambling winnings are taxable in the year you win them.

[Howdy8]

I’m still a bit confused. Am I able to enter the full amount as negative? Or only the amounts reported on my W2gs? Because it will still be an inaccurate depiction.

[JamesG1]

Are you entering 1099-K's or W2-g's?  Does the form report a negative amount?

Gambling winnings can be reported at Federal / Wages & Income / Your Income / Less Common Income / Gambling Winnings.

If you are entering 1099-K's from PayPal, are you following these directions to post the income?

• 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.

When you reach the screen Choose which type of income your 1099-K is for, what income are you selecting?

Or are you selecting multiple incomes?  Please clarify.

[Howdy8]

I have a 1099k that is all from paypal. most of it pertains to gambling and i believe i can itemize to help offset. i have all my gambling logs to show the losses because it’s well over 200k. And my 1099k is for 189k. Help please. I don’t know what to do since these were not business transactions