PayPal /1099k Threshold Requirements

[13121]

Hello there,

I’m from Illinois, so I know each state is different when it comes to receiving a 1099k through PayPal. My question  is  , in order to qualify  . Do I have to go over the amount AND the transactions all together   ? Will I be okay ,if I just went  over the number of transactions I received  but didn’t exceed over the payment amount that Illinois requires to report ? Thanks in advanced 

[rjs]

The rules for when a Form 1099-K has to be issued are federal rules, not state rules. They are the same nationwide.

It doesn't matter whether you get a 1099-K or not. You don't need a 1099-K to file your tax return. If you don't get one, you report your income based on your own records of how much you received. Only PayPal has to worry about whether a 1099-K is required. You don't have to worry about it. What you have to do is keep accurate records of the payments that you receive.

[13121]

@rjs I already made 2 transactions so far, before I make a 3rd , will I receive a 1099k through PayPal , even though I won’t     exceed over $1000 this year  ? 

[rjs]

Are you trying to avoid getting a 1099-K? As I said before, you have to report the income whether or not you get a 1099-K.

PayPal is only required to issue a 1099-K if the total amount of the payments is more than $20,000 and the total number of transactions is over 200. So if you have only 3 transactions and the total amount is $1,000 or less they are not required to issue a 1099-K. Presumably they will not issue it if it's not required.

[13121]

Okay that makes sense. The reason I asked is I’m new at this. I wasn’t aware about the money you received online  , that I considered being a hobby or a gift  involved filing a 1099k, until I ran into a post on Reddit. Thank you for making things clear .

[Critter-3]

The IRS has a wealth of information ... get it here first before reddit ...

https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide

https://www.irs.gov/businesses/small-businesses-self-employed/starting-a-business

[Ejr84]

This is not thorough information. There are states that jumped the gun and implemented the new rule last summer. So, Maryland, being the state I live in, is one of them, and PayPal has now sent me a 1099k for a whopping $3,000 and 46 “transactions,” which were actually gifts from my mother via her credit card. 
So, what do I do now? The federal rule means my 2021 money is supposed to be untouchable bc it’s under the 20k/200 trans threshold, yet Maryland made them send a 1099k because it’s over $600??

so do I add it to my tax return that I file this year or not??? It’s SO confusing when you’re literally being told two different things bc of the state you live in! 

[ErnieS0]

No. Do not add gifts to your federal or Maryland income tax return @Ejr84. It will only cause confusion.

Gifts are not taxable for income tax purposes. TurboTax says: "If you received the money, no matter how much or how little, you don't report anything."

Because the amount was on a Form 1099-K and tax authorities why you received the money, you may receive an audit notice. If you do, simply explain the money was a gift from your mother via her credit card.

Your mother can write a note stating the money was a gift. You can include with your response.

Gifts up to $15,000 per person are not taxable for gift tax purposes to the giver so your mother will not have to worry about IRS issues if she writes a letter for you.

For more info: Where do I report a cash gift?

[Critter-3]

The easiest way to deal with this (lacking IRS or state directions) will be to report this on a Sch C as income and then enter an expense for the same amount to zero out the form... call it "gifts from family".  This will make everyone happy and less chance of an audit.