If paypal is sending 1099 KS to every user, why is cash app not, and only sending to business accounts and not personal accounts? How are they determining what are goods?

[Dava Marie]

How are these payment apps determining what transactions are for goods and services,  and what transactions are for gifts, borrowing and repaying friends or relatives? And the majority of people do not save and record receipts for selling used items. It seems like this may turn into a sticky situation.

[Critter-3]

This is a question for Paypal to answer.  Some apps had the ability to designate some as personal and others as business so only the business accounts will get that form this year.  The IRS has not posted exact instructions on how to handle this  properly however the TT program has adjusted their interview a bit ... more information to come. 

[Critter-3]

We’ve collected your 1099-K information, but you’ll need to add more info about your sale in another section.

1. Select Continue on this screen.
2. On the Your 1099-K Summary screen, select Done.
3. On Your Investments and Savings Summary screen, you’ll see a line item for your 1099-K income. Select Edit or Review and enter the information for the first personal sale item.
   1. Be sure to select Personal Items under the What type of investment did you sell?
   2. The Cost or other basis amount should be the amount you originally paid for the item.
4. Select Continue when you’re finished to go to the Review your Sales screen.
   • If there was more than one personal item sale included in the 1099-K amount, select Add another sale to add each item.
   • If not, you can Continue.

If you sold your personal item(s) for a loss, that loss cannot offset other income on your tax return like capital loss items (stocks).

If you sold your personal item(s) for a gain, then you’ll need to pay short or long term capital gains tax on it, depending on how long you held the item. This is why you should enter each item separately and not net them together.

[Critter-3]

[Anonymous_]

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 wrote:
How are these payment apps determining what transactions are for goods and services, and what transactions are for gifts, borrowing and repaying friends or relatives? 

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Excellent question and one which should be directed to each payment app, network, et al. 

[fanfare]

It not the job of PayPal to make any such determination.

The IRS says when the total reaches $600, issue the 1099-K to the payee.

If some other app is not complying, they might be getting a clarifying call from IRS.

[Anonymous_]

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@fanfare wrote:

If some other app is not complying, they might be getting a clarifying call from IRS.

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Except Cash App allows users to bifurcate business accounts and personal accounts. Although the latter have a per-month dollar cap ($1,000, I believe), it is really anyone's guess as to whether or not the IRS will accept the company's decision to not issue a1099-K to personal accounts despite exceeding the $600 threshold.

[Mike9241]

it going to be a mess for many taxpayers. some 1099K's will include cash transfer that is just money going in and out of the account. for other taxpayers, they really don't have a business but are merely selling used items like clothes etc which will be sold at a loss. the loss isn't deductible and since it really isn't a business reporting on schedule C seems inappropriate. at the present about the only way to report this and hopefully avoiding getting one of those letters from the IRS is to report on schedule 1 line 8z. but as of now with no IRS guidance, even that may create an issue. 

[Critter-3]

This situation has been discussed a lot this past couple of years as the fools in DC inacted the law and expects the poor IRS to deal with it somehow.  Also discussed were the requirements for all the banks to report anyone with $600 or more in their accounts but the banking community shut that down hard for now but who knows what the future will bring.  

https://www.irs.gov/forms-pubs/about-form-1099-k

https://www.irs.gov/payments/form-1099-k-frequently-asked-questions

https://www.irs.gov/payments/form-1099-k-frequently-asked-questions-reporting

[fanfare]

if you sold a personal item you can report it on Form 8949 as follows

"personal item (1099-K)" 12/31/1980  7/4/2022 700 Proceeds 1200 Cost  500 Adjustment Code O (other) 

  Gain or (loss)  -0-

[Anonymous_]

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@Mike9241 wrote:

it going to be a mess for many taxpayers.....

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I don't believe the IRS is going to be happy with this either as they may be receiving as many (or almost as many) responses to CP2000 notices (or whatever) as were sent to taxpayers.

[Anonymous_]

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@fanfare wrote:

if you sold a personal item you can report it on Form 8949......

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Yes, but there are certainly going to be plenty of taxpayers who sold multiple personal items on multiple date(s) as well as those (probably the vast majority) who do not recall the date(s) or purchase price(s) of the item(s) they sold (much less kept receipts).