Why doesn’t PayPal always report credit card transactions on 1099-K?

[Viking99]

Does anyone know why PayPal doesn’t report credit card sales for any amounts and number of transactions on a 1099-K?  

PayPal supports both card transactions (“PayPal Here”) and third-party payment network transactions.

Per IRS website, the reporting requirement for 1099-K:

You should receive Form 1099-K by January 31st if, in the prior calendar year, you received payments:

Case 1: From payment card transactions (e.g., debit, credit or stored-value cards), and/or

Case 2: In settlement of third-party payment network transactions above the minimum reporting thresholds of –

·        gross payments that exceed $20,000, AND

·        more than 200 such transactions

However, per PayPal’s website they only report a 1099-K for Case 2:

How does PayPal report my sales to the IRS? Will I receive a tax Form 1099-K?

PayPal will track the payment volume of your account(s) to check whether your payment volume exceeds both of these levels in a calendar year:

• $20,000 USD in gross payment volume from sales of goods or services in a single calendar year
• 200 payments for goods or services in the same year

Based on the IRS website, I would have expected PayPal to report all credit card transaction, even if just $10 and 10 transactions.

[DianeC958]

PayPal files a 1099-K according to the IRS rules. 

For them to send you a 1099-K you need to have both over $20,000 in sales and 200 transactions or they are not required to file the 1099-K.

[Viking99]

Thank you for your response (I didn't know that you had responded - I didn't get an E-mail...).
As I wrote in my original post, I don't understand why PayPal doesn't have to report sales for any amount (not just $20K/200). Other credit card processors do this and IRS rules requires this. As I wrote above (Case 1):
-------------------------------

Case 1: From payment card transactions (e.g., debit, credit or stored-value cards), and/or
Case 2: In settlement of third-party payment network transactions above the minimum reporting thresholds of –
·        gross payments that exceed $20,000, AND
·        more than 200 such transactions

[MaryK4]

Some states require 1099-K to be filed with a lower threshold- most specifically Vermont and Massachusetts require anyone who received $600 to get a 1099-K.  If you are in a state with a lower filing threshold requirement for the 1099-K, ebay will send one.

@Viking99

[Viking99]

I am sorry, but I still don't get it. IRS "regulations" (for case 1) above state that any card transactions have to be reported on a 1099-K. There is no mention of any minimum amount/transaction volume. Why doesn't that apply to PayPal?

[ThomasM125]

I'm not a tax lawyer, but my interpretation of the regulation is that for a third-party payment network transaction, the amount has to be over 200 transactions and gross payments of over $20,000. I believe PayPal qualifies as a third-party payment network.