Mistakes happen, but when they are made on tax reports filed with the IRS, it’s important that they are corrected to ensure you don’t overpay or potentially lead to an audit.
A reader told us that when PayPal issued him a form 1099-K last month, it was incorrect. “My gross receipts were overstated by 26% (!), which is a LOT of money to explain away to the IRS.”
The seller immediately contacted PayPal to report the errors, but told us, “No one at PayPal would acknowledge that errors were made, and stated that they were just reporting receipts as required.”
“I showed them where they treated the exact same type of receipts in 2 entirely different manners, but no, that didn’t matter. They finally agreed to submit it to their contracted Tax Form provider for review. A week later, I got back a message that everything looked to be in order, and that no change or revision would be forthcoming.”
However, the seller later received the following message from PayPal that it would be issuing a revised 1099-K:
Recently, Internal Revenue Service (IRS) 2019 Form 1099-K was made available to you via U.S. mail. PayPal is required to issue the tax form to you if your account activity meets the tax reporting threshold in order to comply with tax reporting requirements under IRC 6050W.
We will reissue a corrected 2019 Form 1099-K to you which will include corrected amounts. We expect this correction to be completed over the next 2 weeks.
If the correction of your 2019 Form 1099-K causes your payment transactions to be below the tax reporting threshold, then we will issue you a corrected 2019 Form 1099-K showing no ($0) reportable transactions.
We will ensure that corrected 2019 Form 1099-K is reported to the IRS as well as state taxing authorities.
If you have questions regarding this correction, please contact us to speak with a PayPal representative. You may also send an email to email@example.com.
Thank you for your continued business.
The seller believes whatever problem caused the PayPal error on his Form 1099-K may impacted other PayPal customers. “I feel bad for those who submitted their returns to the IRS with the wrong info, and now have to chase that down to show that their explanation is supported by new data.”
The reader also wrote, “Nowhere in the letter does it explain why there is a need for correction, any type of “my bad”, no apology for having provided the incorrect information originally, etc. Just news that you will be getting a new form.”
The lesson for sellers is to check the 1099-Ks you receive from payment processors – they are not infallible.