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socrateaser
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 33883
Experience:  Retired (mostly)
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PayPal has refused to send me a 1099-K, as now required, because

Resolved Question:

PayPal has refused to send me a 1099-K, as now required, because they say that I still owe them money. I finally got a copy from the IRS, but the forms is so new that they don't know what to do with it. Its shows that I received a large sum from Ebay sales that turned out to be a scam so I realized no income from it and in fact lost minor that I had prior to the scam.
Any idea what to do when even the IRS doesnt know ?
Submitted: 1 year ago.
Category: Tax
Expert:  socrateaser replied 1 year ago.
Hello,

I'm a bit unclear on your question. What is it exactly that you are trying to reconcile or accomplish with your tax liability or reporting requirements?
Customer: replied 1 year ago.

Do I need to file an amended return for 2012 to report the income ? Additionally, I did not receive over a third of the income that PayPal claims I did and need to know how to deal with that matter.

Expert:  socrateaser replied 1 year ago.
If you received income in 2012 that you did not report, then you must amend your tax return and report the income. You were required to do this regardless of whether or not you actually received a 1099-K.

If your actual income does not match the 1099-K, then you would only report the income that you actually received. If you are audited, because your reported income does not match the amounts actually received, then you will have to prove to the IRS that you did not receive the income. If you do, then you will not be taxed on the income,, and PayPal will be fined for issuing an incorrect 1099-K.

In addition, you would have a lawsuit against PayPal for its intentional or negligent misrepresentation of your tax liability. Your damages would be the consequential cost of having to produce necessary audited financial statements for the IRS to prove that your income was not as great as claimed by PayPal.

Hope this helps.
Customer: replied 1 year ago.

Indeed it does. However, I received about half of what PayPal claims and all of it was sent to a third party, so I didnt actually realize any benefit from it. In fact, I also lost additional money when PayPal started trying to recoup the losses that they paid out to consumer victims of the scam. This has been heavily documented with law state and federal law enforcement agencies. I am also in Ch 13 and the amount PayPal claims to be owed is listed as a post-petition debt. How does all of the above change the picture ?

Expert:  socrateaser replied 1 year ago.
If money sent to your account was misdirected by a third party fraud, then you would have a business casualty loss equal to the amount of your loss -- i.e., no income at all.

If PayPal has been engaged in a setoff of your account, due to the criminal fraud by a third party, then PayPal is committing theft against you (i.e., civil tort of "conversion") and you can sue to recover the money, and obtain punitive damages for the theft of your property interests.

Concerning the Chapter 13 matter, that's an entirely different issue of law. If you want to discuss this further, please open a new Q&A session in the bankruptcy law category. If you want me to exclusively address the issue, then put my userid at the beginning of your new question (e.g., "To socrateaser and only socrateaser.").

Hope this helps.
socrateaser, Lawyer
Category: Tax
Satisfied Customers: 33883
Experience: Retired (mostly)
socrateaser and 2 other Tax Specialists are ready to help you

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