1099K and 1099-NEC Income

Forum|Forum|3 years ago
October 8, 2022
2 replies
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All of my payments are received via PayPal so I get a 1099K from them; however, some of my clients also send me a 1099-NEC which is problematic as if I deduct from PayPal's 1099K the IRS thinks I'm not filing 100% of income. AND if I don't report the 1099-NECs, it's the same thing? How do I best report this without paying tax twice and inflating my overall income?

VolvoGirl

One answer I saw said....

If you get both a 1099NEC and 1099K,

When tax filing time comes, you must input both forms, however you can add an expense to offset the 1099-NEC income by selecting 'other miscellaneous expenses' and adding 'Form 1099-K income included in Form 1099-NEC reporting' as the description.

imnotrod

If you search 1099-K in turbo tax, it plainly states "if you've already entered a 1099-NEC or 1099-MISC for this income, DO NOT ENTER IT AGAIN HERE"

You are not required to enter anything from the 1099-K. Any income on it that is not reported on a 1099-NEC or MISC can be entered in the "general income" section for the self-employment/business income for the Schedule C.

Sorry this is months late, but advice to "create an expense" to off-set it is certainly NOT what you want to do... no matter what a "level 15" label for a responder means. Plain bad advice from that user. Accounting 101 anyone?

So, bottom line, don't create an expense that doesn't exist - ever,

JamesG1

This IRS publication supports @VolvoGirl's argument for correcting erroneous 1099-K income.

These thoughts come to mind.

You want to report 1099-K income because the IRS is expecting to see the income reported on your Federal 1040 tax return.
You should document fully what and why you are reporting what you report should a taxing authority ask questions several years later.
You should only report the correct amount of income regardless of what is reported on the 1099-K forms. However, to accomplish this, you may have to 'reverse' an entry (or a portion of an entry) to accomplish this task if that is permissable under the tax code. As an example, you sold something for $100 but paid $20 for the item = $80 profit reported under a self-employment activity. You should pay tax on the $80 profit not the $100 gross income.

Is your 1099-K and 1099-NEC income being reported in a self-employment activity?

@LFT71

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