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Angie, Tax Preparer
Category: Tax
Satisfied Customers: 226
Experience:  Bookkeeping, Profit and Loss, Balance SheetsAll types of US Taxes, Tennessee taxes, Personal, business, payroll, sales tax etc.
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PayPal has the form 1099-K business transactions in

Customer Question

PayPal has the form 1099-K for my business transactions in 2015. I know this is forwarded to IRS, correct?
The section 1a, titled 'gross amount of payment card/ thirdparty network transactions" in 1099-K - is this the amount should be entered for "Total Gross receipts or sales" in Schedule C?
Submitted: 1 year ago.
Category: Tax
Expert:  Angie replied 1 year ago.
If 100 percent of your sales are through paypal, then yes. That the number that you should put there.If you receive income from other sources,you will need to add that to the amount listed on the 1099-k and enter the total in that box. This information is reported to the IRS and has been the trigger for many audits. Several businesses have received letters stating that the average business in their particular industry reports xx% of cash sales and the amount on the tax return compared to the 1099-k doesn't fall into average. So then businesses are required to prove their income.
Customer: replied 1 year ago.
Yes. 100 percent of my sales were through paypal in 2015 although in 2014 I had sales done locally and reported the added amount.
So "several businesses have been received letters" from the IRS?
"The amount on the tax return compared to the 1099-k doesn't fall into average" means those business who received letters reported sales amount less than what 1099-k recorded?
Expert:  Angie replied 1 year ago.
No.. as an example....Company reported 100000.00 in revenue1099k showed 90000.00IRS says that people in this industry generally have 40% cash sales... but this business only has 10% cash sales...they want to know why.
Customer: replied 1 year ago.
I see. That makes sense.
I'm not a company. I work from home by myself; I have limited time and resources. I've spent time and energy on online sales more in 2015 than previous years and I have no local/cash sales to report.
Will they still bother to tell me to prove my income since I'm not a company?
Expert:  Angie replied 1 year ago.
Being a fully online business won't result in having to prove you didn't have cash sales. I believe it is industry specific... they have percentages for certain industries and people who file who are outside those percentages throws up a red flag.