- This topic has 4 replies, 5 voices, and was last updated 1 year, 2 months ago by .
-
Posts
-
I noticed something concerning while preparing my taxes. PayPal began issuing 1099-K forms that report my PayPal income to the IRS. Like many of us, I have several libraries that by me via PayPal and report that income to the IRS via their own form 1099. That means my (and your) royalties are being reported to the IRS twice. I’ll discuss this with my accountant soon and see what I can do to avoid being doubly taxed on my royalties. Am I missing something? Has anyone else noticed this and is there a solution?
I reached out to one small, boutique library (C—-l) and they were completely unaware of this & said they would look into it for next year.
Alan, I have never had that happen. Seems there might be a hiccup somewhere?
It seems odd that (for example) “Stock Music Library 1” sends you $1000 in royalties through Pay Pal then “Stock Music Library 1” issues you a 1099 Misc income form. Then Pay Pal, the firm that simply handled the bank transfer, also issues you a 1099-K for $1000. You collected only $1000 in my example, but in the eyes of the IRS you earned $2000, $1000 from the library, then $1000 from Pay Pal which is not what happened! Indeed, I’d be very concerned.
You probably now have to create a $1000 schedule C expense (in my example) to offset the “double income” you did not earn. Yes, hopefully an accountant can find a solution, but do know that the IRS does not care, they see reported 1099 income from “Stock Music Library” and PAY PAL. This is absurd!
Pay Pal should not be in the business of issuing 1099 K’s unless you are literally selling goods and services directly to customers entirely through their platform where all customers pay you solely through Pay Pal’s service.
Most Stock Music Libraries are using Pay Pal solely as a bank wire substitute service. You should try to set up auto deposit directly to your bank whenever possible and just avoid the Pay Pal middle man whenever possible.
Been doing this for a while with our taxes. You just have to back out the PayPal income so you don’t double report your income. I do have an LLC and use an accountant but it’s never been an issue.
The 1099-K seems like a “belt and suspenders” tool to make sure that workers with multiple streams of income comply with reporting requirements.
Here’s some insight from the IRS: https://www.irs.gov/businesses/gig-economy-tax-center
Here’s an explanation from Intuit, which is more or less what Art said: https://ttlc.intuit.com/community/taxes/discussion/you-only-enter-your-total-income-regardless-of-the-breakd/01/689118#M277467