I'm below PayPal's 1099-K threshold but still need to claim income - what's the best way?

I'm trying to figure out the right approach here, so please don't come at me for asking something that might be obvious... I work with several clients who pay me through PayPal. When I asked them about tax forms, they all told me that PayPal would be handling the 1099s. The problem is, I don't meet PayPal's threshold for them to issue me a 1099-K. I definitely earned enough income (around $8,000 total) but I had way fewer than 200 transactions since I only get paid monthly or quarterly by each client. I know I absolutely need to report this income on my taxes, but I'm concerned that without any corresponding tax forms, it might trigger some kind of red flag with the IRS. What's the best way to handle reporting this income? Should I just add it all as self-employment income? Do I need to create my own documentation or something? I'm really trying to do this right and avoid any issues.

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20 comments

Andre Moreau

•8M

This is actually a very common situation! You're doing exactly the right thing by planning to report the income even without receiving a 1099. The IRS requires you to report all income regardless of whether you receive a tax form. Since you're below the 1099-K threshold (currently $20,000 AND 200 transactions for PayPal), you won't receive that form, but you're still obligated to report that income. The best way to handle this is to report it on Schedule C as self-employment income. Keep track of your own records from PayPal showing the payments received. I recommend downloading your PayPal transaction history for the tax year and saving it with your tax records. This will not raise any red flags with the IRS. They're well aware that many people earn income below reporting thresholds. Just make sure you're accurately reporting the amount you received and paying the appropriate self-employment taxes.

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Andre Moreau

•8M

It depends on whether the business activities are related or not. If you're performing essentially the same type of work or selling similar products, you can typically use one Schedule C even if the income comes from different sources or payment methods. If you have distinctly different business activities - like doing graphic design work for direct clients but also selling handmade products on Etsy - then you should file separate Schedule Cs for each business. The key question is whether they're part of the same business operation or represent different types of self-employment.

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Jamal Harris

•8M

I've been in this exact situation and found an amazing tool that helps organize all your income sources whether you have forms or not. I was super stressed about my PayPal income since I didn't get any 1099s either. I tried https://taxr.ai after struggling with tracking everything manually and it was a game-changer. It can automatically analyze your PayPal statements and categorize the income properly for tax reporting. It even helped me identify some business expenses I hadn't thought to deduct! Since you're trying to make sure everything is reported correctly, it might be worth checking out. It gives you peace of mind knowing that you're reporting everything properly without having official forms.

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Jamal Harris

•8M

It works great with multiple income sources! You can connect various payment platforms like PayPal, Venmo, Cash App, and even traditional bank accounts. It pulls everything into one dashboard so you can see all your income streams together and categorize accordingly. Regarding security, I had the same concerns initially. They use bank-level encryption and read-only access, which means they can only view your transactions but can't make any changes or moves with your money. I've been using it for almost a year with no issues. You still need to review the categories it assigns and make adjustments for any unique situations, but it does about 80% of the work automatically, which saved me hours of spreadsheet time.

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Mei Chen

•8M

Just wanted to follow up here! I tried https://taxr.ai after seeing the recommendation and it was exactly what I needed. I had income from PayPal, Venmo, and direct deposits that I was struggling to organize. The tool automatically pulled in all my transactions across platforms and helped me properly categorize everything as business income. It was super helpful for separating personal transfers from actual business income too, which was always confusing me before. Now I feel confident that I'm reporting everything correctly even without having any 1099 forms. Definitely worth it for the peace of mind!

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Amara Okafor

•8M

If you're having trouble reaching the IRS to confirm the proper way to file, I've had amazing success using https://claimyr.com to get through to an actual IRS agent. Check out a demo of how it works here: https://youtu.be/_kiP6q8DX5c I was in a similar situation with income below reporting thresholds and wanted to make sure I was filing correctly. Spent DAYS trying to get through to the IRS directly with no luck - constant busy signals or disconnections after waiting for hours. Claimyr got me connected to a real IRS agent in under 45 minutes who confirmed exactly how to report my PayPal income without a 1099-K. They'll call you when it's your turn in line so you don't have to sit there listening to hold music forever.

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Amara Okafor

•8M

Yes, it actually works! They use technology that continuously redials the IRS until they get through, and they have multiple lines trying simultaneously. When one connects, they transfer the call to you. It's basically doing what you'd do manually but with an automated system that's much more efficient. I understand the skepticism - I felt the same way initially. But the IRS phone lines are notoriously difficult to get through, especially during tax season when millions of people are calling. The difference is their system can make hundreds of attempts while you would eventually give up after a few tries. It's like having someone wait in line for you. The IRS is still providing the free service, you're just paying someone to handle the frustrating part of getting through the busy signals.

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Giovanni Colombo

•8M

I need to eat my words. After struggling for THREE DAYS trying to get through to the IRS about my PayPal income reporting, I broke down and tried Claimyr. Got connected to an IRS agent in 27 minutes. The agent confirmed exactly what to do with unreported PayPal income. She said to just include it on Schedule C and keep my own records of the transactions. She even explained that they have internal systems that can sometimes see PayPal transactions even if they're below the 1099-K threshold, so attempting to hide this income would be a bad idea (not that I was planning to). I'm glad I finally got a definitive answer straight from the IRS. Having that peace of mind was worth it after all.

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Fatima Al-Qasimi

•8M

Bank statements are helpful but not sufficient on their own. The IRS prefers to see the actual source documentation from PayPal because bank statements might only show the lump sum transfers to your bank, not the individual payments from clients. PayPal transaction histories are better because they show who paid you, when, and for what amount - giving a clearer picture of your business activities. I recommend keeping both your PayPal transaction logs AND your bank statements. During my audit, the agent specifically asked to see the original payment platform records to verify the income source.

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ShadowHunter

•5M

This is a great question and you're absolutely on the right track by wanting to report everything properly! I went through this same situation last year with my freelance work. You definitely want to report all $8,000 as self-employment income on Schedule C, even without a 1099-K. The IRS expects you to report all income regardless of whether you receive tax forms. In fact, they're well aware that many people earn income below the various reporting thresholds. Here's what I did that worked well: - Downloaded my complete PayPal transaction history for the tax year (you can export this as a CSV file) - Created a simple spreadsheet tracking each client payment with date, amount, and client name - Kept screenshots of key transactions as backup documentation The lack of a 1099-K won't trigger any red flags - it's actually very common. What would cause problems is NOT reporting income that the IRS might later discover through their data matching systems. Make sure you also track any business expenses related to earning that income (equipment, software subscriptions, etc.) since those can be deducted on your Schedule C. Every little bit helps when you're paying self-employment taxes! You're doing this exactly right by being proactive about proper reporting.

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Rajan Walker

•5M

This is exactly the kind of detailed advice I was hoping to find! Thank you for breaking down the specific steps. I'm definitely going to export my PayPal transaction history as a CSV - I hadn't thought about creating my own spreadsheet backup but that makes total sense for organization. Quick question about business expenses - I use my personal laptop and phone for client work but also for personal stuff. Can I still deduct a portion of those costs, or does it need to be equipment used exclusively for business?

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