PayPal sends a 1099-K if your account processed more than the reporting threshold in a calendar year

PayPal files a 1099-K (Payment Card Network Transactions) with the IRS when your account receives payments that meet the threshold set by the IRS for that year. The threshold has changed several times: it was $20,000 and 200 transactions for many years, but the IRS announced changes to take effect in 2024 and beyond. The exact threshold PayPal uses depends on the tax year and any delays the IRS has announced in implementing new rules.

You will receive the 1099-K from PayPal by January 31 of the year following the payment year. For example, payments received in 2023 generate a 1099-K sent in January 2024. PayPal sends the form to you and files a copy with the IRS at the same time, so the IRS has a record of the payments your account received.

Not all PayPal payments trigger a 1099-K. Personal transfers between friends, refunds you received, and transfers from your own bank account to your PayPal account do not count toward the threshold. Only payments received for goods or services, or certain other business transactions, are included in the 1099-K calculation.

Key Takeaways

  • PayPal files a 1099-K when your account receives payments exceeding the IRS threshold, which varies by year and has been subject to delays in recent years.
  • The 1099-K reports gross payment volume, not profit, so the amount on the form may be higher than your actual taxable income.
  • You receive the 1099-K by January 31, and PayPal files it with the IRS simultaneously, so both you and the IRS have the same information.
  • Personal transfers and refunds do not count toward the 1099-K threshold, but business payments and payments for services do.
  • If you receive a 1099-K you believe is incorrect, you can contact PayPal to request a correction before the IRS important date.

What the 1099-K actually reports

The 1099-K shows the total dollar amount of payments your PayPal account received, not your profit or income after expenses. If you sold an item for $500 and paid $300 in materials, the 1099-K will show $500. This is why the amount on the form may be much larger than what you actually owe tax on — you will subtract your expenses when you file your tax return.

The form also includes a breakdown by month, so you can see which months had the highest payment volume. This can help you match the 1099-K to your own records and spot any discrepancies.

How PayPal determines who gets a 1099-K

PayPal uses the IRS threshold for the tax year to decide whether to send you a 1099-K. The threshold has been $20,000 and 200 transactions for many years, but the IRS announced changes starting in 2024. Those changes have been delayed multiple times, so the actual threshold in effect depends on when you are reading this and what the current IRS guidance says.

You can check PayPal's website or contact PayPal directly to find out what threshold applies to your account for the current year. PayPal also sends you a notice if your account is approaching the threshold, so you are not surprised when the 1099-K arrives.

The threshold applies to each calendar year separately. If your account received $15,000 in 2023 and $15,000 in 2024, you would not receive a 1099-K for either year because each year is below the threshold. But if you received $25,000 in a single year, you would receive a 1099-K for that year.

Payments that do not count toward the 1099-K threshold

Personal transfers between friends or family members do not generate a 1099-K, even if the amount is large. If someone sends you $5,000 through PayPal as a personal transfer, that money does not count toward your threshold. The same is true for refunds: if a customer sends you money back, that refund does not add to your 1099-K total.

Transfers from your own bank account to your PayPal account also do not count. These are your own money moving between accounts you control, not payments received from others. Payments you receive as an employee (wages paid through PayPal) may be reported on a W-2 instead, depending on your employer's setup.

What to do if you receive a 1099-K you think is wrong

If the amount on your 1099-K does not match your records, contact PayPal as soon as you notice the error. PayPal can investigate and issue a corrected 1099-K if the original was wrong. You will need to provide documentation of the discrepancy — for example, a screenshot of your PayPal transaction history showing different totals, or proof that a transaction was refunded and should not have been included.

PayPal must send you a corrected 1099-K by January 31 if the correction is made before the important date. If you discover the error after January 31, you can still request a correction, but it may arrive after you have already filed your tax return. In that case, you may need to file an amended return if the correction changes your reported income.

Do not ignore a 1099-K you believe is wrong. The IRS receives a copy of the form, and if your tax return shows different income than the 1099-K, the IRS may send you a notice asking for an explanation. Having documentation of why the 1099-K was incorrect will help you respond to that notice.

How a 1099-K affects your taxes

The 1099-K is reported to the IRS, so the IRS knows your PayPal account received that amount of money. When you file your tax return, you report your actual income (which may be lower than the 1099-K amount after you subtract expenses). The IRS compares your reported income to the 1099-K to make sure they match reasonably.

If you received a 1099-K but your actual income was much lower because you had large expenses, you will need to document those expenses on your tax return. For example, if the 1099-K shows $50,000 but you spent $40,000 on inventory and supplies, your taxable income would be $10,000. Keep receipts and records of all business expenses so you can back up the numbers on your return.

If you did not receive a 1099-K but you had business income from PayPal below the threshold, you still must report that income on your tax return. The 1099-K is not the only way the IRS knows about your income — you are required to report all income whether or not you receive a form.

Frequently Asked Questions

Do I have to report PayPal income if I did not receive a 1099-K?

Yes. The 1099-K is a reporting form, not a requirement to have income. If your PayPal account received money for goods or services and the total was below the 1099-K threshold, you still must report that income on your tax return. The IRS requires you to report all income from all sources.

Can I get a copy of my 1099-K from PayPal if I lost it?

Yes. PayPal keeps records of all 1099-Ks it has issued. You can log into your PayPal account and read a copy of your 1099-K from the documents section, or contact PayPal's support team to request a copy. You will need to provide the tax year you are asking about.

What if I received money through PayPal for something that is not taxable income?

If the payment was a personal gift or a loan repayment, it may not be taxable even though it appears on your 1099-K. You can explain this on your tax return by reporting the income and then subtracting it as a non-taxable transfer. Keep documentation of why the payment was not taxable income, such as a message from the sender saying it was a gift.

Does PayPal send a 1099-K for international payments?

PayPal reports payments received in U.S. dollars from U.S. sources. Payments from outside the United States may be reported differently depending on the currency and the payer's location. Contact PayPal directly about how international payments are reported on your account.