Personal payments with PayPal

[Possi]

A friend owed a friend $5000. 

He paid her through PayPal. 

This was a personal transaction. Will the IRS question anything if this 1099K is not on the tax return? 

I know there's a lot of this in the world. How are you addressing it?

[Randall]

And what about this Venmo?  Anyone using it?  A couple of clients have asked if they could pay me with Venmo.

[ILLMAS]

Has the IRS been reconciling 1099-K lately?  I have only seen one IRS letter informing the client their reported income (1120) was less than the 1099-K and you owe us for the difference.

[Possi]

I don't use either one of them. 

[ILLMAS]

I believe paypal acts as a merchant service if you are a business, the other cash apps are more for personal use.

[Possi]

17 minutes ago, ILLMAS said:

I believe paypal acts as a merchant service if you are a business, the other cash apps are more for personal use.

So, the IRS would likely not question this? 

Or, should I have it "in and out" and mark the detail as a personal transaction instead of ignoring it?

[gfizer]

Paypal allows you to send and receive payments for goods and services which are subject to Paypal fees and payments from friends and family which are NOT subject to Paypal fees.  Both types of payments are reported on 1099K if they meet the IRS thresholds.  That being said, I would be surprised if it were questioned by the IRS.  Venmo and cashapp are also popular in my area.  

[mwrightea]

If a 1099K is involved, I would take it in and out on the return.  That way,  it's a reminder if there is ever any correspondence from taxing agency.

[Yardley CPA]

1 hour ago, mwrightea said:

If a 1099K is involved, I would take it in and out on the return.  That way,  it's a reminder if there is ever any correspondence from taxing agency.

How exactly would you take it in and out?  + Other income  - Other Income  ??  And what would the explanation be?  

[Possi]

46 minutes ago, Yardley CPA said:

How exactly would you take it in and out?  + Other income  - Other Income  ??  And what would the explanation be?  

Yes, I'm not positive, but I believe my detail statements follow the returns. I would note it as a personal exchange. 

And these two LIVE TOGETHER UNDER THE SAME ROOF. 

ermagerd

I'd be like GIMME MY D@#* MONEY! 

[Catherine]

2 hours ago, Yardley CPA said:

How exactly would you take it in and out?  + Other income  - Other Income  ??  And what would the explanation be?  

What I do is enter it on two lines:  1.  "personal transactions $x" followed by 2. "personal transactions $(x-1)" so the info ends up showing $1 taxable income. Why add taxable income? Because a lot of detail fields don't transmit if there is $0 total.  Leave in the $1 and they get the details.

Many states require 1099-K be explained.  

[Gail in Virginia]

And I have seen 1099K generate a letter - repeatedly.  Customer who has a corporation let her daughter set up the square account.  Daughter set it up in her own name and social security number, even though the bank account belonged to the business.  So for at least two years the corporation reported the income but the daughter got a letter because she did not report the income shown on the 1099K.  First year that happened was a surprise because I did not know how it was set up.  Thought the daughter changed it.  But apparently once set up under a SSN you can't convert the square account to a different tax id.

[Catherine]

5 hours ago, Gail in Virginia said:

square account

Square works well but has some oddball quirks.  Dump the whole account and set up a brand new one will be the only way to fix this.  

[Gail in Virginia]

Actually they fixed it by going out of business last year.  Corporation is closed, and what little business they still do is not a sole proprietorship on the daughter's return since she is the only way still involved.  Problem solved.