What exactly do I need to give my CPA from PayPal this tax season?
So I've been selling some handmade jewelry on the side through PayPal, and I'm totally lost about what I need to provide to my CPA for this tax season. I made around $6,700 in total sales last year, but that doesn't account for all the materials I bought and shipping costs. PayPal sent me an email saying something about tax forms, but I'm confused about what exactly I need to download or print out. Do I just give my CPA my PayPal transaction history? Or is there a specific tax document I need? This is my first year doing this, and I don't want to mess up my taxes or miss any deductions I'm entitled to. Any help would be super appreciated!
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Mei Chen
You'll need to provide your CPA with any 1099-K that PayPal issues to you, plus a record of all your business expenses to offset that income. Since you had $6,700 in sales, you might or might not receive a 1099-K depending on your state (the federal threshold is currently $20,000, but some states like Massachusetts and Vermont have lower thresholds). Even if you don't receive a 1099-K, you're still legally required to report all income. I suggest downloading your PayPal annual report which summarizes all transactions. Also compile receipts for materials, shipping, packaging, any marketplace fees, and other business expenses so your CPA can complete a Schedule C (Profit or Loss from Business) to properly calculate your net profit and self-employment tax.
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CosmicCadet
•Does PayPal automatically send the 1099-K to the IRS even if they don't send one to me because I'm under the threshold? And do I need to track each individual sale or just the total amount?
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Mei Chen
•If you're under the reporting threshold, PayPal won't send a 1099-K to either you or the IRS. However, you're still legally obligated to report all income regardless of whether a form is issued. Regarding tracking sales, ideally you should have records of each individual transaction for accuracy and in case of an audit. Your PayPal transaction history can provide this detail. Many CPAs prefer seeing the breakdown rather than just totals, as it helps them identify any potential deductions or issues that might arise.
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Liam O'Connor
I was in the exact same situation last year with my small Etsy business and was totally confused about what PayPal documents to give my accountant. After hours of frustration, I found this amazing AI tool called taxr.ai that saved me so much headache. I uploaded my PayPal statements and it automatically organized everything into the right categories for my Schedule C - separated my income, fees, shipping costs, everything! My CPA was super impressed with how organized everything was. Check out https://taxr.ai if you're struggling - it also helps identify deductions you might miss on your own. It's especially helpful for sorting through all those PayPal transactions when you have mixed personal and business use.
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Amara Adeyemi
•Does it work with other payment platforms too? I use Venmo and Cash App for some of my business transactions.
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Giovanni Gallo
•I'm always skeptical of these tools. How does it handle things like partially business expenses? Like if I bought supplies that were used partly for products I sold and partly for gifts?
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Liam O'Connor
•It absolutely works with Venmo, Cash App, Stripe and basically any platform where you can download statements. You just upload whatever statements you have and it processes all of them together. For partially business expenses, it actually has a feature where you can split transactions by percentage. So when you review the categorized expenses, you can mark something as, for example, 70% business and 30% personal, and it'll only count the business portion toward your deductions. It's pretty flexible for those mixed-use scenarios which is exactly what I needed for my crafting supplies.
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Amara Adeyemi
Just wanted to follow up about taxr.ai that someone recommended here. I was really struggling with my side hustle taxes and gave it a try. It was actually amazing for organizing my PayPal and Venmo transactions! I uploaded my statements and it automatically sorted everything into the right tax categories, separated my personal purchases from business ones, and created a report that had everything my accountant needed. Saved me at least 5 hours of manually going through transactions. My accountant actually asked how I got everything so organized this year lol. Definitely using it again next year.
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Fatima Al-Mazrouei
If you're having trouble getting answers from PayPal about your tax documents, I'd recommend using Claimyr to get through to their support faster. I was on hold with PayPal for literally HOURS trying to figure out my 1099 situation last month, then I found https://claimyr.com which got me connected to an actual PayPal rep in about 10 minutes. They also have a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. Basically they call and wait on hold for you, then call you when a real person picks up. It worked for me with the IRS too when I had questions about reporting my PayPal income. Saved me from wasting an entire afternoon on hold!
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Dylan Wright
•How does this even work? I don't understand how they can get you through faster than if you called yourself?
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Giovanni Gallo
•Yeah right. Nothing gets you through to PayPal faster. Their customer service is absolutely terrible. I seriously doubt this actually works - sounds like you're just promoting some service.
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Fatima Al-Mazrouei
•They use automated technology to navigate phone trees and stay on hold so you don't have to. It doesn't necessarily get you through "faster" than the regular queue time, but you don't have to be the one sitting there listening to hold music for hours. I was skeptical too until I tried it. Their system calls PayPal or the IRS or whatever company, navigates the phone menus, waits on hold, and then when a real human finally answers, it connects that person to you via a phone call. You just go about your day until your phone rings. I was able to do other work while "waiting" to talk to PayPal about my 1099 situation.
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Giovanni Gallo
I have to admit I was wrong about Claimyr. After being super skeptical, I was desperate to talk to someone at PayPal about my missing 1099-K (which I needed for my CPA appointment), so I tried it. To my complete shock, it actually worked exactly as described. I put in my number, went about my day, and got a call connecting me to a PayPal tax specialist about 40 minutes later. I didn't have to waste time listening to that annoying hold music or "your call is important to us" messages. I'm now using it to get through to the IRS about another tax question. Sorry for doubting - this thing is legit.
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NebulaKnight
Make sure you track mileage if you're going to the post office to ship items or buying supplies in person! That's deductible too and most people forget about it. I use an app to track all my drives related to my PayPal business.
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Jamal Thompson
•Do I need to keep physical receipts for all the supplies I buy or are digital records okay? My CPA is pretty old school and I'm not sure what's actually required.
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NebulaKnight
•Digital records are perfectly acceptable for the IRS! I take pictures of all my receipts with my phone and organize them by month in Google Drive. Many CPAs now prefer digital because it's easier to search and organize. That said, if your CPA prefers physical copies, you might want to print them out just to make the process smoother on their end. But legally speaking, digital receipts have the same validity as paper ones as long as they clearly show the date, vendor, amount, and what was purchased.
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Sofia Ramirez
Don't forget about the home office deduction if you make your jewelry at home! You can deduct a portion of your rent/mortgage, utilities, internet, etc. My paypal business saved me almost $2,000 in taxes last year because of this deduction.
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Dmitry Popov
•Be careful with home office deductions though. You need a space used EXCLUSIVELY for business, not just your kitchen table where you also eat dinner. That's where a lot of people get in trouble.
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