1099-K from PayPal (tax form)

I received a nice answer on TurboTax forums:

https://ttlc.intuit.com/community/taxes/discussion/1099-k-from-paypal/00/1822466

It should be straight forward. I am not ready to do my taxes yet, as I have not received all tax forms for the year.

I will also put together a spreadsheet with all items sold via PayPal, along with cost and original purchase details, just in case I am audited. I think I have all the purchase info, either PayPal purchases, or dealers’ invoice / receipts. It will take some time and effort, but doable.

The key on this seems to be the definition of “business” vs “hobby”, and this is definitely NOT a business for me. Certainly a money losing hobby. It should be easy to prove it to IRS in case of an audit.

@thyname

Thyname, the best bet is to have a specialist in individual taxes look at this or even better email turbotax for help if you can.  I am a CPA but from the corporate tax world and I can usually figure out this individual income tax stuff, but not here.

I did some looking around the IRS publications and guidance and nowhere could I find where it would address your exact situation. It seems like it should be really easy but there are complexities that I find that are too long to write about here. 

The link below doesn't really help.

I received a 1099K for personal property sold through PayPal. When I itemize the cost of personal property items, it calculates a loss in turbotax. (intuit.com)

@Thyname,

Just posted my response and see you already received a response from turbotax which is the same as the last few paragraphs in my link above.

The reason I did not want to give the last paragraph in the link above as the answer, which turbotax did, is because they are saying to record the cost of your equipment sold as an expense of the sale. In the corporate world the cost of your equipment would be a cost of good sold, versus an expense of the sale.

But if turbotax says to list it as an expense of the sale that is your guidance from the individual tax experts. Just be sure that the total expense of sale you put does not exceed your 1099K proceeds.

You are a hobby seller.

First: I am not an accountant! or a lawyer, so please don’t consider this tax or legal advice:

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 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

https://www.paypal.com/us/smarthelp/article/how-does-paypal-report-my-sales-to-the-irs-will-i-receiv...

They should only do this IF you both exceeded $20K and over 200 transactions.

Question: Do you use Ebay/Paypal for non-audio stuff? Did you use the same account for both? That would of course be a no-no. Never mix business with pleasure.  Possibly if you have the same name and address on two different accounts they treat them the same.

If you didn’t do the above, it would seem to me that you should contact Paypal and find out what’s up.


Be careful you never charge taxes for personal sales either. If you did, that would also be an issue if you charged and collected sales tax.

Another potential issue to investigate as a guess is if you sold to a dealer, and not to an individual. They would be reporting their purchase as an expense, and perhaps Paypal mistakenly always generates a 1099-K if you sell to a commercial customer. Clutching at straws, but trying to give you things to investigate.

1. Upgrade to the better TurboTax. Forget the name, it's obvious when you see it.
2. Follow filing instructions.
3. Call if questions.
4. Pay the extra for Audit Defense. Totally absolutely won't regret it awesome. Just Do It.
5. Did you see the step to ask audiophiles tax questions? No. There's a reason for that. Think about it.