Paypal sent me a 1099K [for non-taxable legal settlement]
Paypal sent me a 1099K [for non-taxable legal settlement]
[Moved into a new thread from: Paypal sent me a 1099K [for eBay sales] --admin LadyGeek]
I have received a 1099-K from PayPal reporting a $2K non-taxable legal settlement that was paid to me via PayPal.
Any suggestions as to how to handle that?
If you received a 1099-K for 2021 make sure it’s reporting ONLY transactions related to provision of goods or services taken place after March 11, 2021 because The American Rescue Plan Act of 2021 clarifies Form 1099-K reporting by third-party settlement organizations applies only for transactions for the provision of goods or services settled through a third-party payment
https://www.irs.gov/businesses/understa ... orm-1099-k
I have received a 1099-K from PayPal reporting a $2K non-taxable legal settlement that was paid to me via PayPal.
Any suggestions as to how to handle that?
If you received a 1099-K for 2021 make sure it’s reporting ONLY transactions related to provision of goods or services taken place after March 11, 2021 because The American Rescue Plan Act of 2021 clarifies Form 1099-K reporting by third-party settlement organizations applies only for transactions for the provision of goods or services settled through a third-party payment
https://www.irs.gov/businesses/understa ... orm-1099-k
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
Report the 1099 K income
Then include a subtraction in other income for the same amount with a note (non taxable legal settlement reported on 1099K).
Then include a subtraction in other income for the same amount with a note (non taxable legal settlement reported on 1099K).
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Re: Paypal sent me a 1099K [for non-taxable legal settlement]
I would not report this on my tax return. This is not a taxable item. If you receive a notice later I would just explain that. It is like if my brokerage sent a tax form for interest I didn't get. I wouldn't change my tax return. It needs to be corrected by the issuer (if possible) or addressed with the IRS if it comes up.LSLover wrote: ↑Fri Jan 28, 2022 12:28 pm [Moved into a new thread from: Paypal sent me a 1099K [for eBay sales] --admin LadyGeek]
I have received a 1099-K from PayPal reporting a $2K non-taxable legal settlement that was paid to me via PayPal.
Any suggestions as to how to handle that?
If you received a 1099-K for 2021 make sure it’s reporting ONLY transactions related to provision of goods or services taken place after March 11, 2021 because The American Rescue Plan Act of 2021 clarifies Form 1099-K reporting by third-party settlement organizations applies only for transactions for the provision of goods or services settled through a third-party payment
https://www.irs.gov/businesses/understa ... orm-1099-k
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
I agree with "don't put it on your tax return." Since it's not taxable, there is no proper place to report it. And believe it or not, the IRS probably knows that not every 1099-K will be for income that should be reported.
The same is true of 1099-Q. And having gone through six tax years each with a non-taxable and non-reportable 1099-Q, we never heard a word from the IRS (if you do not qualify for educational credits and the entire 1099-Q is non-taxable, there is no place to report it on your tax return; software such as TT won't even generate a form dealing with education expenses and credits).
In the event you do hear from the IRS, you don't panic and instead reply with a well-written letter acknowledging the 1099-K and stating it was non-taxable and non-reportable and why. And then you wait again until you hear from them further. In fact, I'm going to suggest that reporting it and then trying to offset it with negative income is more likely to cause IRS issues than not reporting it at all as I'd expect negative income (other than capital losses) to be a big red flag to the IRS.
The same is true of 1099-Q. And having gone through six tax years each with a non-taxable and non-reportable 1099-Q, we never heard a word from the IRS (if you do not qualify for educational credits and the entire 1099-Q is non-taxable, there is no place to report it on your tax return; software such as TT won't even generate a form dealing with education expenses and credits).
In the event you do hear from the IRS, you don't panic and instead reply with a well-written letter acknowledging the 1099-K and stating it was non-taxable and non-reportable and why. And then you wait again until you hear from them further. In fact, I'm going to suggest that reporting it and then trying to offset it with negative income is more likely to cause IRS issues than not reporting it at all as I'd expect negative income (other than capital losses) to be a big red flag to the IRS.
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
I have a feeling there are going to be a lot of people in scenarios like this that use Venmo, PayPal, etc. Back to requesting paper checks I go
For the sake of future searching is this kind of note possible to add using TurboTax or another product for e-filing? Anything that goes down the road of paper filing seems like a non-starter both now and going forward.
For the sake of future searching is this kind of note possible to add using TurboTax or another product for e-filing? Anything that goes down the road of paper filing seems like a non-starter both now and going forward.
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
Line 8. It's literally called "other income" and yes it can be negative. If it invites issues then a person will be able to read the explanation you included.AnEngineer wrote: ↑Sat Jan 29, 2022 9:37 amWhere? Also, is other income allowed to be negative? That seems like it would invite issues.
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
I moved a question by Hanksmoney into a new thread. See: [Sold items on Facebook market. How can I reduce tax impact?]
(Thanks to the member who reported the post and explained what's wrong.)
(Thanks to the member who reported the post and explained what's wrong.)
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
Almost a guarantee a 1099 not reported on the return will result in at least a cp2000. Might as well head it off.
Re: Paypal sent me a 1099K [for non-taxable legal settlement]
^^^ Here's some background info: Topic No. 652 Notice of Underreported Income – CP2000