Stimulus Bill Requires Payment Processors & Businesses To Report Earnings of $600+ on 1099-K Tax Form (e.g. Paypal, Portals, eBay, Uber)

Update 12/24/22: The IRS has delayed this for one year. More details in this post.

Update 1/28/22: See follow-up post, About That 1099-K From Paypal

Update 12/20/21: Just a reminder that this goes into effect beginning January 1, 2022. Again, this is not a new tax and does not increase or decrease the amount of taxes you are required to pay by law. It’s just more forms and accounting hassle that will have to be dealt with. And of course, if there’s anyone who was underreporting their income it’ll get much harder for them to do so now.

We’ll likely have to wait until 2023 until we have more clarity on how Paypal and other companies are deciding which payments were for goods and services and which are rebates or other kinds of money transfers.

Related, I once wrote my non-professional thoughts on taxation as it relates to the little hobby of ours, see My Thoughts on Taxes for Miles, Points, and Cash Back.

Original Post:

A major under-reported facet of the massive $1.9 stimulus bill (round 3) is that it strengthens requirements on payment processors like Paypal to report on income received through their platforms:

Beginning on January 1, 2022, third party payment processors will have to report any income for goods or services exceeding $600 during the calendar year on a form 1099-K. Previously, processors only had to report this income if it was BOTH: (a) $20,000 or more during the calendar year, and (b) 200 transactions or more. This allowed most smaller stuff (like Topcashback, Ebates, PFS, Swagbucks payments) to go unreported.

(A few select states such as Illinois already have stricter laws requiring reporting at the $600 threshold, but most areas are currently governed by the federal requirements. Those are changing in 2022.)

This change concerns me for a few reasons:

  • I’m worried that companies may not always know what is ‘goods and services’ and what is not, leading to misclassifications. E.g. portal earnings are likely rebates and not considered ‘goods or services’, but I’m not confident that Paypal will classify that correctly (as has been the case in the past when even P2P payments were somehow included in the 1099).
  • Even if everything is correct and it’s income that I’m reporting anyway, it still adds a level of complication to everything, e.g. making sure the tax form is directed to the correct entity (personal or business), and having to burden your accountant with multiple small tax forms from a bunch of random companies.
  • It’ll also complicate things for an occasional seller, e.g. someone sells their old iPhone on eBay for $600 and gets hit with a 1099-K which they or their accountant will have to deal with, even though they don’t owe any taxes on the sale (it sold for less than they bought it for years earlier).
  • I wonder what will happen if someone gets double-1099ed. E.g. if someone gets paid $600 from a portal through Paypal, and they get a 1099-K from both Paypal and the portal for the payment. That might complicate things a bit.

Whether or not you get a tax form does not change what you actually owe, e.g. if you don’t get a tax form you still have to report income earned, and if you do get a tax form you still only pay tax on the actual profits. The primary purpose of this stricter law seems to be for gig workers like Uber/Lyft drivers and the like, but it seems like the rest of us will get encumbered by this as well.

Important note: The 1099-K is just for total processed transactions, it’s not assumed to be your total profit; typically the profit on a sale is only a tiny percentage of the 1099-K reporting amount. Or it could be zero if you sold something for the same amount you bought it for. It does still create a hassle with the tax reporting. Fo example, you might have to report a business which earned zero, versus simply leaving it off your tax return entirely. Also note, Zelle will not send out 1099s, according to this NBC article.

Interestingly, if you earn $500 from Topcashback and $500 from Ebates, and have them both paid via Paypal, then you’ll possibly  get a 1099-K from Paypal. But if you get paid from Topcashback and Ebates directly to your bank, then you should not get a tax form.

You can read the full stimulus bill at this link; section 9674 is what we are discussing in this post:

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Curmudgeon (@guest_1517731)
December 23, 2022 17:48

This has been pushed out a year per IRS

Fred (@guest_1517634)
December 23, 2022 15:25

Using Paypal as an example, is the 200 transaction threshold (which I guess is going to be in place for the 2022 tax year) based on the number of payments Paypal sends you, or receives on your behalf?

I went through my Paypal transactions for 2021 and I am trying to figure out why they didn’t issue a 1099-K for last year.

midas89 (@guest_1517636)
December 23, 2022 15:31

Fred Remember, one must have both 200 transactions AND $20,000 worth for the year to trigger a 1099-K. Example: Let’s say one received $40,000 in a total of 85 transactions for the year, no 1099-K would be automatically triggered. Of course, people still need to report the money to the IRS and pay taxes, it’s just that the company facilitating the payments to you is not required to report it and issue a 1099-K. There are reports in the past that sometimes PayPal issued a 1099-K anyway, perhaps even by accident, but the law did not require it.

Fred (@guest_1517645)
December 23, 2022 15:43

Ah, thank you, I missed that part.

Celia (@guest_1517642)
December 23, 2022 15:40

I live in a state where the requirements have been in place for the last couple years. It’s supposed to be just payments categorized as goods and services. Initially, everything received via PayPal was on my 2020 1099-k, from swaybacks and ibotta to splitting the bill with friends. A corrected one was issued later that removed all of it. Since then, I’ve kept it all under $600.

midas89 (@guest_1517647)
December 23, 2022 15:46

Celia My guess is that if a state took it upon themselves to require the small limit, it will remain in place even if Congress changes the $600 limit to something higher. I wonder why the small number of states decided to make such a drastic change while the majority of other states did not.

Oh, and thanks to your avatar, I am reminded I need to buy some Lucky Charms cereal. 🙂

Celia (@guest_1517662)
December 23, 2022 16:00

midas89 I’m quite sure the states will keep the same reporting requirements. MA was a state that had one in place for a long time. IL, NJ, AR, PA, VT and DC all enacted various thresholds in 2020. I thought CA did as well or maybe just proposed it. Just like the IRS figured out, the states raised a bunch of revenue by doing so.

Enjoy your breakfast 🙂

midas89 (@guest_1517665)
December 23, 2022 16:06

Celia Ha. Thank you. Regarding California: I am happy to report that luckily, as of this writing, CA has not yet enacted their own reporting requirements. Thanks for the states list. I did not know it was that many states.

Celia (@guest_1517678)
December 23, 2022 16:24

midas89 Glad to hear CA didn’t actually go through. Going into 2022 tax year, there were 10 states that had varying threshold differences (missed MD, MS and MO that I didn’t know about).

Though it won’t affect me since I’m already in a state that requires it, my fear is that while Congress and the IRS bicker (yeah, shocking thought :)), other states will look at implementing it on their own. And if they use a low threshold like $600, that will supersede anything Congress eventually settles on.

Eric (@guest_1517579)
December 23, 2022 14:08


According to this article, the IRS has delayed this by a year.

midas89 (@guest_1517586)
December 23, 2022 14:17

This one-year delay is a going to be a holiday gift for a lot of people. Many feel that Congress will eventually increase the minimum amount, which was $600 in payments, of course. Some in Congress have proposed raising it to $5,000, while others have suggested returning it back to $20,000. Maybe they’ll compromise and make it $10,000. It’ll be interesting to see how this progresses in 2023.

Celia (@guest_1517623)
December 23, 2022 15:03

Some states had already moved the needle before the feds did. It’ll be interesting to see if they can come to an overall consensus.

sam (@guest_1517590)
December 23, 2022 14:20

Games…I knew they’d backtrack it but I figure after a year of “riots”. I don’t know about trusting it though. Seems like “bait” to me. Get you to use paypal past the threshold and whoops! We’re going ahead with it!

Yvonne (@guest_1352138)
March 23, 2022 12:25

Will this new law also affect surveys where your payment is received through PayPal? Would that be considered a goods or service even though not buying or selling?

According to PayPal “you don’t have to worry because as long as you didn’t reached the $600.00 limit in receiving payment for the transaction of goods and services or if it the payment that you received was processed as personal payment” no 1099K shall be issued.

However, I’m not certain what the specific definition of “goods and services” actually means???!!!

Secondly, I’m concerned about rebates and coupons from sites such as Rakuten and Ibotta. Also, from class action lawsuits where funds are received on the PayPal portal. (For the later I may request rebates to be sent via check and U.S. Mail).

According to PayPal, these types of transactions defined as “money made back from rebates and coupons is not taxable” and shall not be included on the 1099K. Yet, I’m just not sure about the accuracy and information from PayPal.

At this point it seems to be a bit of a guessing game.

Might anyone have any further clarification please? Many thanks!

sam (@guest_1352232)
March 23, 2022 14:54

If you are unsure, you should probably assume it is taxable, or at least that Paypal won’t really care either way except to CYA for themselves and will report it. Then you have the headache. If you are close, your best bet is to avoid going over and stay away from Paypal as much as possible. Personally, I see this either disappearing in a few years with the headaches/outcry or at the very least being much more accurate. I would NOT bet on that being the case in 2022….this is the year they make up for the last couple of decades and they’ll do so by giving everyone and their brother a 1099-k whether they should get one or not or whether their funds were taxable or not. They will hide behind the “oh well its not up to us to determine if its taxable” crap, but in the end you’ll get the nasty letter to pay more and have a hell of a time rectifying it then.

Obtain the Grain
Obtain the Grain (@guest_1321661)
January 26, 2022 17:14

Just received my Paypal 1099-K. The majority of the gross transactions was from being fantasy football league treasurer…yay!

gordda40 (@guest_1307746)
January 1, 2022 15:30

So now here we are here at 2022. We sell a few items on eBay that are personal (not for profit) and eBay managed payments sends the payment directly to our bank account and takes their fees out before doing so. Nothing goes through Paypal any more on our end. If the buyer pays with Paypal, it does not show up that way to us. Will we see one of these 1099-Ks for the transactions I am describing?

Justin (@guest_1313197)
January 11, 2022 14:31

Just exceeded $600 sales in eBay and they are withholding payment of the funds until the completed 1099-K is added to the account. Neat.

sam (@guest_1313206)
January 11, 2022 14:47

That must be why paypal isn’t worried. Yet another reason to withhold peoples’ money. I didn’t know they needed another one!

AllenW (@guest_1307557)
January 1, 2022 09:42

Anyone know if PayPal will include QR transactions. From time to time I receive payments and will stop using it if I have to taxes.

RiskandReward (@guest_1304228)
December 23, 2021 12:15

Has Paypal or Venmo provided any guidance to consumers about this? Given the potential complexity and confusion over this matter, people may decide to give up on using Paypal altogether to avoid the headache/drama of dealing with this. Or are they afraid of putting something in writing due to their screwed up accounting and reporting?

sam (@guest_1304271)
December 23, 2021 14:01

Why would they? Do they want to draw more attention to this so people do decide to move away from the service like I will with my piddly 1k? They are under no obligation to let consumers know. They also know what they are likely to do- put it all on the form and ask questions later. Why would a banker go “oh nevermind that SAR”? Of course they wouldn’t they’d go ahead and file it anyway because there’s only penalties for NOT doing it. Paypal etc are in the same situation. If they did want to do right and explain it then of course they’ll be accused of helping millions in taxes go unreported when people circumvent their processing methods to avoid detection…

RiskandReward (@guest_1304304)
December 23, 2021 15:37

Thanks for the link. This reads like a sh*tshow, as there can be no assurances that Paypal will file the correct amounts and the IRS may get up your ass because numbers don’t match with reality.

I wonder what gets counted when we use the 5% Paypal categories with Discover and Freedom? Is a $1500 amount going to show up mysteriously as a business transaction?

Andy (@guest_1311717)
January 8, 2022 13:28

I assume it will, so I pay myself using two accounts under my own name, so it’ll be easier to explain there’s no business taking place if I do get a 1099.

Kafka (@guest_1304110)
December 23, 2021 04:53

I’ll be curious to see GAO’s math on how much this will cost to enforce vs the additional tax collected. Don’t get me wrong, I like people paying their fair share, I just don’t like spending $100 to save $99.

Jack (@guest_1304200)
December 23, 2021 11:29

Most of the “matching” the IRS does is computerized, comparing the amount on the return to the forms filed by companies, but possible that a lot of mismatches will cause a backlog. I read that one of the bigger problems they were having were when people would get paid through PayPal and also get a 1099-MISC from the payer, resulting in double reporting.

Ssjjs (@guest_1304037)
December 22, 2021 22:37

Is zelle included ?

Arnold Rothstein
Arnold Rothstein (@guest_1307860)
January 1, 2022 20:46

Pretty sure it is

midas89 (@guest_1311786)
January 8, 2022 15:51

Zelle is included, as are all similar services. As of this writing, however, if you send via Zelle via your bank’s Online Banking site, they still have not implemented a way to designate whether the payment is for goods or services or not. Venmo and PayPal have such a feature. When you get to the Pay screen using Venmo, there’s a button to activate that indicates if the payment is for goods or services. In PayPal, you can designate if it’s for friends or family or goods or services.

So, it is not yet known how Zelle will comply with the new reporting rule. Let’s hope they don’t just decide to 1099-K everyone where they leave it up to the receivers to sort it out on their tax return.

midas89 (@guest_1320181)
January 23, 2022 14:47

Thank you, Greg! Most media outlets, including NBC, had been including Zelle when reporting the new law changes. I am happy to know that we now know Zelle is not required to 1099-K report.