IRS form 1099-K from PayPal versus form M-1099-K reporting requirements in MA

[theduffys23]

If you live in Massachusetts and have been sent an IRS form 1099-K versus the optional Massachusetts specific M-1099K - must you include the income on your federal return? 

To be clear - the IRS threshold is $20,000 but the MA is only $600. This is for the specific Mass residents that are receiving the form and are under the federal threshold of $20,000. 

HOWEVER 

They did receive an IRS form and not a Mass specific form. 

Will the IRS be expecting these to be filed simply because they were issued? 

[AmandaR1]

Yes, regardless of the form, the income should be considered for your return. If you are self-employed or a LLC, the income is reportable and you deduct your expenses. If you sold a few personal items (not for a trade or business) and you have a loss (common), you do not need to report the income. 

The threshold is for the companies issuing the forms, but not for you to report the amount. If you are required (or choose) to file a return (based on exceeding minimum income thresholds), then you must report all income. 

The 1099-Ks are a requirement for the payment processing companies - to - the IRS/MA state. They simply include a copy to you. You are required to account for this income, regardless of if you get a form or not. 

You do not enter form 1099-k on your return.  

In other words, you don't need to be concerned with if these companies are following the rules or not. Let me know if you have any questions. 

[theduffys23]

Thank you, I am seeing a lot of conflicting information on this topic. Would you have any advice or answers as to what one would keep on file as proof of the income not being taxable? We sold personal items, many of which were purchased over 10 years ago this year to make ends meet and shipping costs are a big part of the amounts reported on the forms when filing as an individual and not a business.

[AmandaR1]

You should re-create records (which can be as simple as writing on a piece of paper). Note everything you can recall about each sale (come up with a date, amount paid, how paid, where purchased). Then, calculate your gain/loss on each sale by taking the amount it sold for, minus expenses to sell it (shipping), minus your cost. As long as overall, you have a loss, you do not need to report it but you should document it as such.

[theduffys23]

Thank you so much for this easy to understand and clear answer!!

[mbeb]

@TurboTaxAmandaR So do you not expect MA to audit individual sellers of personal items, although the Paypals, Ebays, Etsys, etc are reporting to them 1099-Ks? I got rid of junk in the basement also, however used my paypal account from 10 years ago originally used for selling dog treats; do you think MA may look at this differently as it is from a business type account?
thanks