Big news: One-year reprieve on 1099 reporting for ebay etc.

[BobC]

In response to the people posting about how they received 1099-K forms for 2022, but did not meet the $20k of sales and 200 transaction thresholds, first off, I don't know what state(s) you live in. There are some states that have had their own, already reduced 1099 reporting thresholds in place prior to now. During earlier threads where this reduced federal threshold requirement came up and was being talked about, other members had posted about how they were already getting 1099-Ks at lower thresholds because of where they lived in prior years as well.

Here's a good, concise article that summarizes and shows the states and their various reporting threshold requirements, specifically as they relate to 1099-K reporting.

https://sovos.com/blog/trr/irs-delay...es-until-2023/

You'll also note that in this linked article, it emphatically states that the 1099-K reporting requirements specifically call for only Goods & Services payments made through TPSOs (Third Party Settlement Organizations), like PayPal, to be included on 1099-K forms. PayPal Friends & Family payments, or other such non-taxable payments received through other TPSO platforms, should not be included on any 1099-K forms issued for the year 2022.

For the first poster that got a 1099-K form without having reached the $20K/200 transaction threshold limit, check the linked article to see if the state you are in has one of the lowered 1099-K reporting threshold requirements. If so, that probably explains why you still got a 1099-K form. Now if you do not live in one of the states with a lowered reporting threshold requirement, you may want to contact PayPal, or whoever it was that sent the 1099-K form to you, and ask them if it was somehow sent to you in error? It is possible this was a mistake on the issuer's part, and they never intended to send you a 1099-K form for 2022. But don't forget, the deferral of the lowered 1099-K reporting threshold requirement only happened just before Christmas. I'm pretty sure all the TPSOs out there had already updated and put their systems in place to prepare and send out 1099-K forms to everyone for 2022 based on the lowered reporting threshold limit of just $600. This very sudden, last-minute change can easily have caused confusion, issues, and mistakes to occur within some of these big TPSO organizations, to the point where their automated systems may have mistakenly gone ahead and automatically mailed out some 1099-K forms that they really didn't have to. By checking with the TPSO that sent you the 1099-K form you got, they hopefully can tell you if the form was mistakenly sent to you, and assuming that is what happened, you can then ask if they also mistakenly sent a copy to the IRS as well already. With luck, if they did err in sending the 1099-K form to you, they may have already caught their mistake and corrected their system(s) so as to not also send unnecessary 1099-K forms on to the IRS.

However, even if you actually did end up making/receiving less than the prior year's $20K/200 transaction threshold limits, so you didn't really need to have a 1099-K form sent to you for 2022, just remember that the law is merely to force TPSOs to report and issue 1099-K forms once a certain level of sales/transactions was reached. There is NO rule or law that says the TPSO can't still issue a 1099-K form to anyone that comes in below those threshold limits. So even if the TPSO you got a 2022 1099-K form from didn't need to send you one, they could still do so if they wanted. And there isn't a darn thing you can say or do about it as long as the amount(s) they reported on it is/are correct. So again, try calling the TPSO that issued the 1099-K form to you and find out if it was an error, or maybe them just deciding to go ahead and start using the lowered reporting threshold for reporting purposes anyway. As I mentioned, they probably had already set up their entire automated systems to calculate and report everything based on the lowered reporting threshold already, and maybe figured it was even more work and bother for them to try and change everything back at literally the last minute. The big thing you want to try and confirm though is if the TPSO does admit to not having needed to send you the 1099-K form, are they still the going to forward a copy of it to the IRS as well. If they cannot, or will not, either confirm or deny they will be forwarding a copy to the IRS, you need to think long and hard about being safe, and smart, and being sure to report that 1099-K income somewhere on your 2022 federal income tax return. Remember, legally you are supposed to be reporting that income on your tax return whether you got a 1099-K form reporting it to you and the IRS, or not! For if the TPSO does end up sending a copy of your 1099-K form for last year to the IRS, and you do not include and report it somewhere on your 2022 federal 1040 tax return, I can GUARANTEE you with 100% CERTAINTY that you will eventually be contacted by the IRS about the discrepancy on your return.

Now as for the other poster who said he got PayPal Friends & Family payments he received last year erroneously included in the amounts reported to him on his 1099-K form for 2022, before anything else, go back and double, and maybe even triple, check your records and numbers, and compare them to your Paypal account records for the year, to be absolutely certain your 1099-K form income being reported to you is wrong. I'd then print out or otherwise have copies and/or access to all your pertinent records at hand, and then call PayPal and explain how you received an erroneous 1099-K form from them, and what the correct amount should be. If you are correct, and can get them to realize/see their error, they should agree to prepare and issue you, and the IRS, a corrected copy of your 1099-K form for 2022. What I don't know is how long that could take them. There is an IRS imposed deadline for an issuer to get 1099-K copies submitted to the IRS, and that due date is today, January 31, 2023. However, there is no specific deadline to then get them corrected copies. You are kind of at the mercy of PayPal I'm afraid, and how quick they will move to correct their error. It is also possible that PayPal may just try and blow you off and not do anything to correct the erroneous 1099-K form, or maybe even insist they are right and you are wrong, though I would sincerely hope that is not the case. In that instance, if they refuse to help you despite having the records and data to back up and prove their error, you may need to go ahead and file your tax return anyway, using the incorrect 1099-K income they reported as your gross income/sales amount received in 2022, and reporting that same amount somewhere on your 2022 federal income tax return as your gross taxable income/sales for the year. And then you deduct/take off the erroneous Friends & Family payments received, along with and as part of all your other applicable expenses and deductions, to arrive at your true taxable income. Be sure to keep all records, info and data supporting your claim as to the error, and keep that with your 2022 tax return and tax records for at least four years. (Technically you only need to keep tax records three years, but I usually advise people to keep them at least four years, just to be safe.)

Having said all that, a couple other issues/concerns do come to mind regarding erroneous reporting of PayPal F&F payments as supposedly G&S payments. I do not have firsthand experience, but have heard that PayPal may now be monitoring even more closely the activities of their users for potential abuse of the F&F function. PayPal is not stupid, and realizes that many people who do not want to have to report G&S income received to the IRS may try to switch over to using F&F services going forward to escape the IRS finding out how much their sales really are. And Paypal also knows that they don't get to charge their service fee for the F&F service. So not only are such potential abusers cheating the IRS, they are also cheating PayPal. I thought I'd heard/seen somewhere that when PayPal did find what they felt was abusive behavior, that they would suspend that user's account from the ability to do anymore F&F transactions. Again, I do not have firsthand evidence or proof of this, but would assume that even if Paypal shut down someone's F&F account, they wouldn't also automatically transfer that F&F activity over to then be reported as G&S income on the account owner's 1099-K form for that year. So, to the person asking about the alleged erroneous F&F receipts being reported as part of their G&S income being reported/shown on their 1099-K form, is there any chance you had any contact or inquiries from PayPal during the prior year in regard to the usage of and activity in your F&F account? If so, is there any possible chance PayPal may have reassigned some/all of you F&F receipt activity from last year to G&S activity? I'm assuming PayPal would not do such a reassignment without expressly informing you first, but you never know with large companies of their size. But I have to ask to cover all the bases.

The other concern/issue I then wanted to bring up is, I don't know how much activity you have during the year in your PayPal G&S and F&F accounts. Nor if you have a lot of it right around the calendar year ends. Reason for my asking is that you may be keeping track of your G&S income based on a different measure, or maybe more appropriately a different timing, than how Paypal accounts and keeps track of it. Is it possible you have a lot of year end G&S activity that you maybe count as being received in the year it actually ends up being put into your account, whereas Paypal may be putting it into the year where they had received it, but not yet released it into your account? You also never said how much of a difference this error you are talking about is. Is it at all possible the difference you discovered is not F&F payments after all, but maybe just G&S payments you received in early 2023 that Paypal had marked you down for as actually receiving in 2022? Just speculating, but also trying to cover all the possible bases I can think of off the top of my head regarding your question/issue.

Hopefully, this will help the two of your asking specific questions, and maybe others receiving 1099-K forms they weren't expecting this year as well, or that they thought weren't accurately reporting their 2022 G&S income.