PayPal and Tax Reporting for Bloggers
PayPal is a wonderful thing. You can pay people and get paid without having to exchange credit card or bank account information or your social security number. This makes it perfect for bloggers!
It also makes it a little confusing come tax time. If you received payments through payment processors like PayPal, the tax forms you get are a little different than what you are used to. And you might not even get a tax form.
If you are a blogger accepting payments through PayPal or if you pay for services for your blog through a payment processor then you need to know about how to report those payments to the IRS and on your taxes.
Here is what you need to know about PayPal and tax reporting for bloggers.
PayPal and Tax Reporting for Bloggers
What is a Form 1099?
The first thing we need to define is what is a form 1099. 1099s are informational returns. They simply tell you how much money you received from things like dividends or interest. The form we are specifically concerned with as bloggers are the 1099 Misc forms you might be receiving.
This is where that wonderful income we receive during the year gets reported. I go into a lot more detail on the 1099 Misc in this post—> 1099 Misc Information for Bloggers: Don’t Make These Costly Mistakes!
The big thing to remember is that there is a $600 minimum for companies to need to send you a 1099 Misc. This means if you receive less than that in business income from a single company, you won’t get a form.
To clarify, this does not mean you need to make more than $600 as a blogger to report your income on your taxes. It means if you receive less than $600 from a single source you will not get a tax form from them. You still report that money.
What is a Form 1099 K?
The 1099 K is the form that payment processors use to report your taxable income to you at the end of the year. It contains the gross payment volume you received from them.
What does that mean? In terms of a PayPal account, it means this one form contains every cent paid to you for that calendar year through PayPal. It does not differentiate between where that money came from. You don’t know if you got $100 from company A and $600 from company B. (So don’t depend on that to be your tracking system for your bookkeeping.)
The Big Difference Between a 1099 Misc and a 1099 K?
The big difference between these two forms, well, the one that matters most to us as bloggers anyway, is the threshold to send out this form.
PayPal and other processors follow IRS Section 6050W. To get this form in a single year you need to:
1. Receive $200,000 in payments AND
2. Receive 200 payments or more
Most bloggers are not getting that, which means you can make a decent amount of money through PayPal and never see a tax form from it. Super, right? (Some states have lower limits, so research where you live.)
What Do You Need To Report From PayPal Income?
Short answer? When you pay taxes report everything, all your income. That’s the default for everything. If you made money, report it.
If you have been tracking your income through the past year, this shouldn’t be an issue. You know how much money you maid and where it came from.
How To Find Your Income Without a 1099 K
Let’s just say you did not track everything as well as you could have. We’re all busy, it happens. You are going to need to look through your PayPal account and find every business transaction for the last year.
Yes, that sounds time-consuming, so I don’t recommend it.
If you know the names of the companies you received payments from that should help. Mediavine, for example, gives you instructions on their site on just how to do this.
What About Double Reporting?
Just because companies don’t have to send you a 1099 Misc doesn’t mean they won’t. There is a penalty to not sending one out when required, but no penalty for sending one out when you don’t need to. (Provided the information on the form is indeed correct.)
So it is entirely possible you could receive both a 1099 K and a 1099 Misc with the same income reported on both. What should you do if that happens?
Know Your Income
This is another time when it is so helpful to have been tracking your income as the year goes. You know how much you made, so when you are compiling your tax information you should notice that your forms are telling you that you made more money than your records do.
What Do To If You Think Double Reporting Is Happening
If you think you have a double reporting situation you need to talk to your tax professional about it.
Any time you have a question about your 1099 Misc the first step is to contact the sender and ask for a corrected form. If that doesn’t help your tax professional will be able to help you explain to the IRS what is happening so you are not assessed more tax then you need to pay.
PayPal and Bloggers
PayPal is a great way for bloggers to conduct transactions. But it does not eliminate your tax responsibilities.
The short version of what you need to know?
- PayPal sends out form 1099 K, not 1099 Misc.
- You might not get a tax form from PayPal as the threshold for sending the form is much higher.
- You still need to report any income received through PayPal (and other payment processors).
- Tracking your income will help with filing taxes.
- If you think you have a case of double reporting, talk to your tax professional.
Here is more information to help you out!