PayPal Quietly Toughens Their 1099-K Issuance Policy

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Reader IS250 reports on a change PayPal made for the year 2020 and beyond as they broadened the scope of 1099-K issuance to include MassPay payments received, such as payments you’ll receive from Swagbucks, Topcashback, Cardcash and dozens more.

The form 1099-K is for payment processing companies to report those who received more than $20,000 in payments AND had 200+ transactions throughout the calendar year. If you are receiving small amounts of payments, you have nothing to worry about in most of the US.

{Important: While those are the federal reporting requirements, some states have stricter rules: In Vermont, Maryland, Virginia, and Massachusetts the threshold for mandatory 1099-K is just $600 in payments with no minimum transaction amount. In Illinois the threshold is three transactions AND $1000 of payments.}

Previously, PayPal would only count transactions for which YOU paid the processing fee, e.g. if you sell something on eBay and receive payment via PayPal, you’ll be paying the 2.9% fee and that’ll count toward your $20,000 threshold.

Beginning 2020, they seem to be counting payments received from other businesses who pay using the PayPal MassPay, even though it’s the business sending who is swallowing the fee. Examples of Mass Pay Payments include Swagbucks, Coinbase, Topcashback, Vivid Seats, Mypoints, Ysense, Cardcash, Ibotta, Dosh, etc. Reader Celia reports even getting a 1099-K for money she received for splitting a meal with friends.

If you are active in the reselling/portal/etc space, it’s quite possible you’ll have received numerous payments via Paypal and end up receiving a 1099-K for the year. None of this technically changes any tax reporting requirements, but tax forms can sometimes be a pain to deal with, depending on the situation. E.g. if there was no taxable income on the received funds, you still might have to file yourself as a business with $0 income in order to explain the 1099-K. Consult a tax advisor for your own situation.

Again, in most states you’re okay so long as you stay below $20,000 in received payments throughout the year OR you stay below 200 transactions total – either one will keep you beneath the reporting requirements. In the other states mentioned above, it’s really quite difficult to avoid getting the 1099-K, and you might want to try avoiding PayPal altogether for receiving payments if you find the tax form a nuisance.





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