As long as the Paypal account is listed in the name of the non-profit organization, my assumption is that the funds received through Paypal were charitable contributions to your non-profit organization. If so then be sure to include the 1099K contribution revenue in the totals reported on your 990N form and do not need to report it anywhere else. Keep the copy of the 1099K for your files. If your charitable organization were receiving funds that were unrelated to the charitable purpose, those funds would be taxed and reported on form 990T (unrelated business income tax or UBIT).