How do I avoid being taxed twice for the same income?

[spendlove]

I live in Utah and do email marketing as an affiliate. The commission payments I get go right into my business PayPal account. The various organizations I help promote also send me a 1099. Normally I would just list the 1099s on my tax return, but this affiliate revenue is already recorded via the Form 1099-K that PayPal submits to the IRS. So the numbers from the 1099-K are what I put on my tax return.

Now the IRS is saying that I failed to record these other 1099s that I received, which is technically correct. But how do I go about fixing this so the affiliate income is not counted twice? If its more correct to document the 1099s I have received, then somehow I need to adjust the sales numbers on the PayPal statement, right?

Thanks!

 

[LdiJ]

I live in Utah and do email marketing as an affiliate. The commission payments I get go right into my business PayPal account. The various organizations I help promote also send me a 1099. Normally I would just list the 1099s on my tax return, but this affiliate revenue is already recorded via the Form 1099-K that PayPal submits to the IRS. So the numbers from the 1099-K are what I put on my tax return.

Now the IRS is saying that I failed to record these other 1099s that I received, which is technically correct. But how do I go about fixing this so the affiliate income is not counted twice? If its more correct to document the 1099s I have received, then somehow I need to adjust the sales numbers on the PayPal statement, right?

Thanks!

I assume that you filed a Schedule C? I am also assuming that the letter you received was a CP-2000 (upper right hand corner of the letter). If so, what you need to do is respond in writing to the IRS, explaining to them that all of that income was included on your Schedule C, and that the 1099-MISC forms were duplicated by the 1099-K that you received from Paypal. Basically, explain it the way that you explained it here.

However, it's also important that the two of them actually are similar in amount, or that the Paypal amount is higher than the 1099s. If the 1099's add up to more than the Paypal amount, they won't buy the explanation.

You could have a tax professional who is experienced in dealing with IRS letters, help you respond to them as well.

 

[Taxing Matters]

But how do I go about fixing this so the affiliate income is not counted twice? If its more correct to document the 1099s I have received, then somehow I need to adjust the sales numbers on the PayPal statement, right?

In addition to explaining to the IRS that your PayPal 1099 included the amounts from those other 1099s to address the letter that you received you'll want to put an attachment on your future returns when filing them that explains the same thing if you are in the same situation. That won't guarantee you won't get future letters, but it may reduce the possibility of it.

 

[davew9128]

Are the companies sending you 1099s paying you via credit card through PayPal? They aren't supposed to issue 1099s if they are.

 

[LdiJ]

Are the companies sending you 1099s paying you via credit card through PayPal? They aren't supposed to issue 1099s if they are.

Where does that info come from? I am not aware that using a credit card to pay for something absolves a company from issuing a 1099 to the vendor.

 

[quincy]

Where does that info come from? I am not aware that using a credit card to pay for something absolves a company from issuing a 1099 to the vendor.

This, maybe?

https://www.irs.gov/businesses/understanding-your-form-1099-k

 

[Zigner]

This, maybe?

https://www.irs.gov/businesses/understanding-your-form-1099-k

That doesn't seem to state that a company doesn't need to issue a 1099 to the vendor...

 

[davew9128]

Where does that info come from? I am not aware that using a credit card to pay for something absolves a company from issuing a 1099 to the vendor.

Try page 2 of the instructions to the form. "Form 1099-K. Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-K. "

This is not new.

 

[LdiJ]

Try page 2 of the instructions to the form. "Form 1099-K. Payments made with a credit card or payment card and certain other types of payments, including third-party network transactions, must be reported on Form 1099-K by the payment settlement entity under section 6050W and are not subject to reporting on Form 1099-MISC. See the separate Instructions for Form 1099-K. "

This is not new.

I don't issue 1099Ks so I would never have reason to look at the instructions. Since the people who issued him a 1099-Misc don't issue 1099Ks I doubt that they would have looked that the instructions for form 1099K either. Looks like the OP should also inform those companies that they should not be issuing 1099-MISCs to him and why.

 

[davew9128]

I don't issue 1099Ks so I would never have reason to look at the instructions. Since the people who issued him a 1099-Misc don't issue 1099Ks I doubt that they would have looked that the instructions for form 1099K either. Looks like the OP should also inform those companies that they should not be issuing 1099-MISCs to him and why.

I just quoted the instructions to 1099-MISC. I'm guessing you don't prepare those either...

 

[LdiJ]

I just quoted the instructions to 1099-MISC. I'm guessing you don't prepare those either...

Well then why did you say that it was for form 1099k? I do prepare those but we don't pay anyone via credit card that would get a 1099-MISC.

 

[Zigner]

I just quoted the instructions to 1099-MISC.

Your source wasn't stated.

 

[davew9128]

Well then why did you say that it was for form 1099k? I do prepare those but we don't pay anyone via credit card that would get a 1099-MISC.

I didn't. You assumed that and misread the quoted portion.