confused about issue with PayPal/1099-K

[MZB]

I live in Michigan. I've been doing some online sports betting and poker
(legal here) and channeling winnings to my personal PayPal account ($750
total for this year). There is no business account. I got this email
from PayPal:

>>>>>>>>>>>>>>>>>>>
Resolve the issue with your Tax ID Number

The Tax ID Number you provided wasn’t recognized by the tax authority.
Please provide the correct Tax ID Number to meet the new January 2022
IRS requirement and avoid disruption to your account.

3 steps to add your Tax ID Number
To meet the new IRS requirements, follow these steps for each of your
PayPal accounts.

Log in through the Resolve It Now button
Choose your taxpayer status from the dropdown menu
Enter your U.S. Tax ID Number, your name and your business type if
it applies.

Then, if needed based on the amounts you've received, we will use the
information you've provided to send you a Form-1099-K in January and
share this information with the IRS.

If you've already entered your Tax ID Number, you may have received this
email because your information doesn't match IRS records. Log in to
confirm that it's correct.
Sole proprietors and single-member LLCs: When confirming your taxpayer
status, enter your individual name as it appears on line 1 of your 1040,
1040A, or 1040EZ. If you'd rather provide your Employer Identification
Number, submit your Form W-9 together with proof of filing of Form 8832
to taxdocum...@paypal.com to ensure that what we provide on your
1099-K matches IRS records.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

The email is legit. I went to the site and confirmed my SSN.
I'm sure that PayPal considers the deposits as payment for
goods/services that I provide.

So, will I be getting a 1099=K? How do I handle that? Can I just call it
misc income (sports betting? Gambling?)

Finally, why would PayPal have difficulty verifying my SSN?

Mel

--
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<< that may be imposed upon the taxpayer. >>
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[ira smilovitz]

It's possible that PayPal thinks your SSN (xxx-xx-xxxx) is an EIN (xx-xxxxxxx) and thus is failing when they try to verify it.

If you get a 1099-K, you will report the income appropriately, that is, on whatever line(s) the income would be reported if you didn't get a 1099-K. IRS income document matching of 1099-Ks is prone to errors due to differences in the reporting requirements of the 1099-K issuers and the definition of income for the recipient, so you can probably expect a letter or two from the IRS after your income tax return is filed.

Ira Smilovitz, EA
Leonia, NJ

[MZB]

Ira:
Thanks for your reply. I had not thought of that (EIN vs. SSN).
After doing a bit more research, I'd be shocked if I actually got a
1099-K. The regulations seem to indicate a 1099-K is mandated when you
have $20,000 of income and > 200 transactions. NEXT year it changes
drastically to $600 of income, period! I suspect they are gearing up for
2022. This really means, if I want to avoid the 1099-K hassle, I should
move MORE winnings into PayPal THIS year and keep it under $600 next
year. I am not a professional -- only recreational poker/sports betting.

It would seem -- 1099-K or not -- I should report this as misc. income.
Am I missing something?

Mel

[ira smilovitz]

As of now the 1099-K reporting thresholds aren't changing for 2021. They're still $20K and/or 200 transactions. As to how to report this on your tax return, you should report the amounts in the same fashion as you would without the 1099-K. Unfortunately, there are significant problems with the IRS document matching to 1099-Ks. The 1099-K reports gross transactions regardless of whether those transactions represent reportable income or not. For instance, the 1099-K would include items such as tips, sales tax, etc., even though they are not part of the gross receipts of a business. So, regardless of what you do, you may receive an inquiry from the IRS.

Ira Smilovitz, EA
Leonia, NJ

[Rick]

"ira smilovitz" wrote in message
news:8605f584-390f-4814...@googlegroups.com...

Just to be clear, because there has been some confusion about this, the
1099-K thresholds are unchanged for tax year 2021, but they ARE changing to
$600 and no minimum number of transactions for tax year 2022.

--

[Stan Brown]

On Thu, 7 Oct 2021 13:48:56 EDT, MZB wrote:
> The regulations seem to indicate a 1099-K is mandated when you
> have $20,000 of income and > 200 transactions. NEXT year it changes
> drastically to $600 of income, period! I suspect they are gearing up for
> 2022. This really means, if I want to avoid the 1099-K hassle, I should
> move MORE winnings into PayPal THIS year and keep it under $600 next
> year.

It sounds like you think that PayPal must issue a 1099-K this year if
you have over $20,000 of income but must not issue one if you have
under $20,000.

However, the way these regs are usually written, they must issue a
1099-K for income over $20,000 but have the OPTION to issue one or
not, at their discretion, for income under $20,000. If they're
gearing up for 2022, they may have decided to issue a 1099-K for
anything over $600 this year, and you would not have any grievance if
they do.

--
Stan Brown, Tehachapi, California, USA https://BrownMath.com/
https://OakRoadSystems.com/
Shikata ga nai...

[MZB]

On 10/7/2021 8:08 PM, Stan Brown wrote:
> On Thu, 7 Oct 2021 13:48:56 EDT, MZB wrote:
>> The regulations seem to indicate a 1099-K is mandated when you
>> have $20,000 of income and > 200 transactions. NEXT year it changes
>> drastically to $600 of income, period! I suspect they are gearing up for
>> 2022. This really means, if I want to avoid the 1099-K hassle, I should
>> move MORE winnings into PayPal THIS year and keep it under $600 next
>> year.
>
> It sounds like you think that PayPal must issue a 1099-K this year if
> you have over $20,000 of income but must not issue one if you have
> under $20,000.
>

> However, the way these regs are usuallyS written, they must issue ai GUESS

> 1099-K for income over $20,000 but have the OPTION to issue one or

> not, at thet ir discretion, for income under $20,000. If they're

> gearing up for 2022, they may have decided to issue a 1099-K for
> anything over $600 this year, and you would not have any grievance if
> they do.
>

Stan/Ira:

Ira seems to imply that I WILL get a 1099-K. I assume that I will NOT.

As Stan points out, I guess we won't know.

Apparently anybody who has funds deposited into PayPal (probably other
than a bank-type transfer) is now going to get hit with the 1099-K.

Suppose I get one declaring say $1000 income and I put that in misc.
income. So, I am declaring that income. Is there still a problem? It
sounds like there might well be.

Mel

[MZB]

On 10/7/2021 8:08 PM, Stan Brown wrote:

> On Thu, 7 Oct 2021 13:48:56 EDT, MZB wrote:
>> The regulations seem to indicate a 1099-K is mandated when you
>> have $20,000 of income and > 200 transactions. NEXT year it changes
>> drastically to $600 of income, period! I suspect they are gearing up for
>> 2022. This really means, if I want to avoid the 1099-K hassle, I should
>> move MORE winnings into PayPal THIS year and keep it under $600 next
>> year.
>
> It sounds like you think that PayPal must issue a 1099-K this year if
> you have over $20,000 of income but must not issue one if you have
> under $20,000.
>
> However, the way these regs are usually written, they must issue a
> 1099-K for income over $20,000 but have the OPTION to issue one or
> not, at their discretion, for income under $20,000. If they're
> gearing up for 2022, they may have decided to issue a 1099-K for
> anything over $600 this year, and you would not have any grievance if
> they do.
>

Further Update:

Found this on PayPal site:

>>>>>>>>>>>>>>>>>>>>>
Will PayPal report my Merchant sales to the IRS?

PayPal tracks the total payment volume on your account to determine
whether it meets the IRS threshold in a calendar year:

$20,000 USD in total payment volume from sales of goods or services in a
single calendar year and,
200 payments for goods or services in the same year....

We may ask you to provide your Taxpayer Identification Number (TIN.) A
Social Security Number (SSN), Individual Taxpayer Identification Number
(ITIN), or Employer Identification Number (EIN), to your existing
account, if you don’t already have one on your account. If your TIN
fails verification, you’ll need to complete a substitute Form W-9.

If you’ve met the state or IRS threshold in a given calendar year,
PayPal will send you a Form 1099-K in January of the following year and
submit this form with the IRS in March.

You can access your Form 1099-K from your PayPal account by January 31.

You can find more information and FAQs by visiting the Tax Help Center.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Mel

[ira smilovitz]

I did not mean to imply that you would get a 1099-K. My only point was that regardless of whether you get one or not, you need to report your *income* correctly. The 1099-K will not report income, only the gross amount of transactions paid to you.

As a further aside, and this is my cloudy crystal ball at work, I anticipate the 2022 1099-K changes will be postponed or rescinded before the end of 2022. The problems the IRS is having with 1099-K matching under the current rules will be exponentially worse under the 2022 changes.

Ira Smilovitz, EA
Leonia, NJ

[Tom Russ]

On Wednesday, October 6, 2021 at 8:01:36 AM UTC-7, MZB wrote:
>
> If you've already entered your Tax ID Number, you may have received this
> email because your information doesn't match IRS records. Log in to
> confirm that it's correct.
>

In addition to verifying the number, you should also check that your name at PayPal matches the IRS records.