Paypal issued me an incorrect 1099K and refuses to correct it. What can I do?

[JMK17]

I had a transaction come in as "Buyer/Seller" accidentally. I immediately called PP and asked them to void the transaction since it was my roommate paying rent (which has happened 2x/month for 3 years) - after a great deal of back and forth, PP refused to void the TX, but did agree to release the PP fee to me so I could pay rent in full.

Now it's appeared on my 1099K as a sale and I don't want to pay taxes on rent money from my roommate. I called PP and they advised there is no way to update b/c they can't change TX codes! What can I do about this?  PP knows it's an incorrect TX, but refuses to take action.

[FuriousFotog]

Were you actually able to get a 2021 1099K? A lot of us are having issues getting the 2021 tax forms to show up on our side. 

Regarding your question: I think what you are going to have to do since it's included on the form now is use it to make your filing then continue to work with Paypal on getting a corrected one later, and then if it's less than the reported amount (which it should be if you're trying to get something removed), you can work to re-file your return and then get a refund (assuming no other payout is required). Definitely a painful thing to go through though...

[JMK17]

Yes, I did get the 1099K just today, but - as you see - be careful what you wish for! The correct amount on my 1099K should be $2.15, but they've reported almost $900 to the IRS! I guess I have no choice but to file taxes as is and report the discrepancy to the IRS.

[GMA5]

I still cannot see the 2021 tax form.  How was your issue resolved?

[FredGwynn]

The only way to resolve this issue is to show the PayPal reported 1099K income on your tax return, and show the equivelant 1099K reported income amount, as a Refund or Credit on your Schedule C - Part I, Line 2.

Easy to do in TurboTax, or HR Block TaxCut.

Trust me I have tried to have PayPal resolve and correct the **bleep** 1099K, including directly contacting the PayPal CEO's office - Dan [removed].

His email is - take a guess - name., [removed] (sorry, system disallows posting actual email address, go figure)

I encourage you to send emails, as the more complaints to the CEO, the more likely a problem resolution will be established by PayPal.

Right now, they are just hiding behind their BS reply that they are following IRS rules.

I can share the full CEO response, if anyone would like to see it

[JMK17]

I had to do basically what Fred describes below. I did get through to the IRS, and they advised me to fill out my tax form as though i had a business, and then claim the total amount of the "error" payment as expenses to zero it out. I called my business, "I don't actually have a business..." and I did get my refund already, so it worked!  Thankfully, because Paypal was utterly useless.

[willowgal]

This is ridiculous. It happened to me; my brother sent money to help with bills, and now I have a 1099K that says I sold $5,000 worth of goods or services. At the time I didn't know about refusing the transaction -- I was just mad that I lost the fee and told my bro never to do that again. 

There must be some other solution than filing this form as if one were a seller.

[JMK17]

That is so awful. And, it's exactly what happened to me. Paypal insists they have no way to change a transaction code once the money has been sent. I never heard of the "refuse payment" option, but I called Paypal within 15 minutes of receiving the payment, since I noticed the PP fee removed from my money.  As I indicated above, they did eventually release the fee to me so I could pay rent and, given the three-year track record of these same payments twice a month, it was obviously just an error on my roommate's part. That said, PP therefore knows this payment was not goods/services, but refuses to update the 1099K and refuses to re-code the transaction.

PP, it is YOUR system, of course you can re-code transactions. Obviously, you would need strict guidelines on when that could occur, or what level of employee could do that, but obviously you CAN do it. 

The idea that they have knowingly reported incorrect information to the IRS and refuse to correct it is mind-boggling.

[FredGwynn]

PayPal should have a Class Action files against them, for their false 1099K reporting activity, and the waste of time PayPal creates - by refusing to fix and issue amended and corrected 1099Ks, for obvious transaction errors.   

I have spent over 4 hrs on the phone with PayPal, as recently as today, to have PayPal re-issue their incorrect 1099K, but they REFUSE!!!  When the original payment activity was received in error, and PayPal can see that the original payment receipt activity was received in error (and refunded same day) - PayPal still refuses to correct their mistakenly issued 1099K.

This is criminal behavior on PayPal's part, given the down the line IRS ramifications PayPal's mistakenly issued 1099K creates, and PayPal's unprofessional refusal to fix a 1099K error!

Financial Institutions that actually care about their Customers, will work with their customers to fix 1099K errors - NOT PAYPAL!!

Please reach out to me for any Lawyer interested in developing a Class Action.

[JMK17]

Amen, FredGwynn. It IS criminal. 

I thought I was finally getting somewhere because I was issued a case number by Paypal's IRS Department, but then I got an email reply 2 days later stating, again, that if the transaction came in as a buyer/seller, then there is no way to change it (even if they were put on notice within only a few minutes of the transaction going through and even if they refunded me the fees because they understood it was incorrectly coded.)

I gave up and called the IRS directly - they were able to help, thankfully. But, I basically had to create a "fake business" in order to claim the "income" and then claim the entire amount as expenses.  Totally ludicrous. If I get audited, there is going to be some further issues here.