Got a Paypal 1099K for about $200 from non-sales stuff - do I actually have to file this?
I'm so confused right now. Just checked my email and found a 1099K from Paypal for around $200. This makes absolutely no sense to me since it's just my personal Paypal account that I use for sending money to friends, splitting bills, and occasionally selling a couple old things from my closet. Nothing business related at all! When I logged into Paypal and checked my transaction history, I realized most of the money was just my roommates paying me back for utilities and groceries, plus my brother sending me money for my mom's birthday gift we went in on together. There were maybe 2-3 small items I sold online for like $30 each. Is this even taxable income? Do I seriously have to report this on my taxes? I've never had to deal with a 1099K before and don't understand why Paypal is suddenly treating my personal account like I'm running some kind of business. I'm worried about messing up my taxes or getting in trouble with the IRS over something that isn't even income. Any help would be really appreciated because I'm totally lost here!
20 comments
Join the conversation
Nathaniel Stewart
The 1099-K reporting thresholds changed a few years back, which is why you're seeing this now even for small amounts like $200. Here's what you need to know: The money that's truly personal transfers (roommates paying for utilities, splitting gifts with family) isn't actually taxable income - it's just reimbursement. However, the items you sold could potentially be taxable if you sold them for more than you originally paid. You should definitely still file your taxes, but you'll need to separate the actual income (those items you sold) from the non-taxable transfers. You can report the sales on Schedule C if you're selling items regularly, or on Schedule D if they're personal items sold for a gain. Keep good records of which transactions were personal transfers versus actual sales. Download your Paypal transaction history and annotate it to show which is which. If you get audited, you'll need to be able to explain that most of the 1099-K amount wasn't actually income.
0 coins
Riya Sharma
•Thanks for the explanation! I'm in a similar situation. Would I need to attach some kind of note with my tax return explaining that most of the transactions weren't income? Or is there a specific form I need to fill out to show that?
0 coins
Nathaniel Stewart
•You don't need to attach a note with your tax return. When you file, you'll report only the actual income portion (the items you sold) on the appropriate schedule. The IRS system will flag a discrepancy between what PayPal reported and what you reported, but that's normal in these situations. Just make sure you keep detailed records of all your PayPal transactions with notes about which were personal transfers versus sales. If you're using tax software, there's usually a section where you can enter 1099-K information and then adjust the taxable amount to reflect only the true income portion.
0 coins
Santiago Diaz
I had this same issue last year and spent hours trying to figure it out until I found taxr.ai (https://taxr.ai). Their system analyzed my PayPal transactions and automatically categorized which ones were actual income vs. just friends paying me back for dinner and stuff. Saved me so much stress! The cool thing was it recognized patterns in my transaction history to separate the reimbursements from actual sales. You just upload your PayPal statements and it does the work. It also gave me documentation to keep with my tax records in case of an audit showing exactly why I didn't report the full 1099-K amount as income.
0 coins
Millie Long
•How accurate was it at categorizing? I've got a ton of random PayPal transactions and don't want to go through them manually.
0 coins
KaiEsmeralda
•Sounds interesting but does it work with other payment platforms too? I got a similar issue with Venmo and Cash App this year.
0 coins
Santiago Diaz
•It was surprisingly accurate - like 95% right on the first pass. For the few transactions it wasn't sure about, there's a simple interface to correct them. Much faster than doing everything manually, especially if you have dozens or hundreds of transactions. Yes it definitely works with other payment platforms! I've used it with Venmo too, and they support Cash App, Zelle and even cryptocurrency transactions. The system is designed to work with pretty much any transaction data you can download.
0 coins
Millie Long
Just wanted to update after trying taxr.ai - it actually worked really well for my situation! I was skeptical at first, but it saved me hours of manually going through my PayPal and Venmo transactions. It correctly identified which payments were just friends paying me back for group purchases versus the few items I actually sold for profit. The best part was getting a detailed report that broke everything down clearly. I'm keeping this for my records in case the IRS ever questions why I didn't report the full 1099-K amount as income. Seriously relieved to have this sorted before the filing deadline!
0 coins
Debra Bai
If you're getting nowhere with the IRS about this 1099-K issue, try Claimyr (https://claimyr.com). I spent DAYS trying to get someone on the phone at the IRS to clarify how to report my PayPal transactions, but kept getting disconnected or waiting for hours. Claimyr got me connected to an actual IRS agent in about 20 minutes who answered all my questions. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent confirmed that personal transfers (like roommates paying you back) aren't taxable income even if PayPal reports them on a 1099-K.
0 coins
Gabriel Freeman
•Wait, this actually works? I thought it was impossible to get through to the IRS these days. How much did they charge you for this?
0 coins
Laura Lopez
•This sounds too good to be true. I've literally spent HOURS on hold with the IRS and never got through. How does this service actually work? Are you sure you didn't just talk to some random person pretending to be from the IRS?
0 coins
Debra Bai
•Yes, it really works! I was shocked too. They use some kind of system that navigates the IRS phone tree and holds your place in line, then calls you when they've got an agent on the line. No more waiting on hold for hours. They don't have people pretending to be IRS agents - they just connect you directly to the actual IRS. Once connected, you're talking to a real IRS employee who can access your tax records and everything. I confirmed this because the agent knew details about my previous tax returns that only the IRS would have access to.
0 coins
Laura Lopez
Just wanted to follow up about Claimyr - I was totally skeptical (as you could see in my previous comment), but I was desperate after trying to reach the IRS for weeks about my PayPal 1099-K issue. IT ACTUALLY WORKED! Got connected to an IRS agent in about 30 minutes. The agent explained exactly how to handle the situation with my PayPal 1099-K - confirmed that personal reimbursements aren't taxable even if they're included in the 1099-K total. She walked me through how to properly document everything and what forms to use. Would have never figured this out on my own, and definitely wouldn't have gotten through to ask without Claimyr.
0 coins
Victoria Brown
You could also just enter the 1099-K on Schedule C and then list all your personal transfer amounts as "returns and allowances" which would reduce your taxable income. That's what my tax guy told me to do last year with a similar situation.
0 coins
Samuel Robinson
•Isnt that kinda risky? Sounds like it might trigger an audit if you're reporting a business with almost all returns.
0 coins
Victoria Brown
•It's actually not risky if done correctly. The key is proper documentation. Returns and allowances is a legitimate line item on Schedule C specifically for reducing gross receipts. Many businesses have various adjustments. You should keep detailed records of each transaction with notes explaining why it's not taxable income. If you're concerned, you can also attach a statement to your return explaining the situation, though it's not required. The important thing is being able to substantiate your claims if questioned.
0 coins
Camila Castillo
I literally jst went through this! The 1099k threshold used to be $20,000 AND 200 transactions, now its just $600. This is causing SOOO much confusion for regular people who aren't businesses. If these were just personal transfers (not goods/services), then its not income. You don't need to report money that's not income. Like if your roommate venmos you for half the rent... that's not income!!
0 coins
Brianna Muhammad
•Actually the threshold is supposed to be $5,000 for 2023 tax year. They delayed the $600 threshold again. But some payment processors might still be sending them at $600 because the law keeps changing.
0 coins
JaylinCharles
Make sure you look at whether the payments were sent as "Friends & Family" or "Goods & Services" in PayPal. Only the Goods & Services ones would potentially be taxable income. If your roommates sent money as Friends & Family for utilities, that wouldn't trigger a 1099-K normally. Something seems off if you only had a few small sales.
0 coins
Lola Perez
•I just went and checked all my transactions, and you're right - most were sent as Friends & Family! But there were like 6-7 transactions that people sent as Goods & Services even though they were just paying me back for stuff (I guess they didn't know the difference). So maybe that's why I got the 1099-K? Seems like I'm going to have to figure out how to explain this on my taxes since PayPal is reporting it all as business income. Ugh, what a headache over $200!
0 coins