Double Taxation by PayPal

[mars lewis]

Ok. There's a situation now where Adobe stock contributors are being double taxed, because not only does Adobe stock issue a 1099 to Adobe stock contributors but now PayPal does the same thing. I want to know what the solution to this double taxation scenario is , how to handle it and how to avoid paying income tax twice on Adobe stock contributor earnings. Please only respond if you actually know the answer and the method for taking care of this dilemma. 

[Abambo]

What is clear?

• Adobe generated revenue for you.
• PayPal is like a bank. They did not generate revenue for you (well, except if they paid you additional money).

What should you do?

• In all evidence, you will need to contest the tax form from PayPal, as it is wrong.

(source: https://turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-an-irs-1099-form/L3NxSPMUe)

As this site is not a tax advisory site, it is strongly recommended to ask a tax advisor.

[mars lewis]

Not the practical solution I was looking for. Contesting a situation that is bound to be ubiquitous with even just this community adds an uncessary layer of complexity that neither myself, Adobe, PayPal or IRS will find satisfactory. There's bound to be a simpler solution. 

[Nancy OShea]

Are you certain it's an actual TAX and not a statement of PayPal's fees & interest?  It goes without saying that you will receive many statements from banks, stock brokers and entities who paid you as it's required for income/tax reporting purposes. 

Adobe can't give you financial or tax advice.  Nor can fellow users.  When in doubt, contact your accountant or tax expert.

[mars lewis]

They shouldn't be double reporting income through a third party. 

[mars lewis]

The logical solution is for Adobe or PayPal to decide who's going to report the income - and do it only once.

and BTW I was really only interested to hear from other contributors experiencing the same scenario who actually make enough sales to trigger the issuance of a 1099 by PayPal. I wish others would kindly walk on by. 

[Abambo]

This is a public forum. You can't pick who answers you. In addition, this place is not to give you tax advice. Either you know how to handle this or you need to ask a tax professional.

[moe hong]

The form I got from Paypal was simply about their fees and interest, not about the principal. Did the amounts on the two forms you receive match?

[mars lewis]

Hey!! It's a tax form 1099 reporting income. 

[mars lewis]

No they didn't cause people take payouts at various times of the year. One thing for sure is that any amount paid out by Adobe thru Paypal has been previously reported of a 1099 issued by Adobe.

DOUBLE TAXED. What's so difficult to comprehend here? Really. My god.

[Nancy OShea]

DOUBLE TAXED. What's so difficult to comprehend here? Really. My god.

By @mars lewis

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So you say.  I'm not convinced that you know what you're saying, but then I'm not paid to. That's not my wheelhouse.

I'll defer to what your accountant or tax adviser tells you because that's what they're paid to do.  The cost of being a self-employed freelancer is hiring skilled professionals to help you.  And it's tax deductible.

You're welcome.  😊

[mars lewis]

If you made more than $600 in commission in 2023 then you would have received a 1099 from PayPal reporting that as income already reported by Adobe. Reported twice. Times two. X 2. Example: $600 x 2 = tax liability on $1200. 

and I know what to do. I just understand the incompetency that allows such a simple scenario to become so convoluted. Should not exist.

[Jill_C · Accepted solution]

There's no need to be rude to fellow Contributors who are trying to help. You can do the research on the link shown below. Paypal, and other payment middlemen, are now required by law to provide 1099s for income over a certain threshold. There does seem to be a flaw in the procedure though, as corporations are also required to provide 1099s for income >$600 in a year. As suggested by others here, it seems best to consult your tax preparer as to how to prove that the 1099s are duplicating the reported income.
Current Form 1099-K Reporting Thresholds | United States (paypal.com)

[Jill_C]

Also, unless you have actually had tax withheld from your earnings, you haven't been "double taxed". The only way you will be "double taxed" is if you are unable to exclude one of those 1099s from your 1040.  

[Nancy OShea]

unless you have actually had tax withheld from your earnings, you haven't been "double taxed".

By @Jill_C

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Exactly.  It's only a TAX when it has been taken away.  Normal checks & balances reporting are not taxation.

[mars lewis]

If you include both 1099 forms with your 1040 then you're taxed twice. You just can't decide to ignore one of them. 

[Nancy OShea]

If your tax was already withheld and paid to IRS, you're not taxed twice on the same income.

You're not an accountant or a tax preparer so I don't expect you to understand how things work.  That's why you need to consult with a professional who can explain it to you.

[mars lewis]

We're done Nancy. We're talking about reporting only NOT withholding. Ok? Please stop. 

[Nancy OShea · Accepted solution]

We're done Nancy. We're talking about reporting only NOT withholding. Ok? Please stop. 

By @mars lewis

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OK.

[Discussion locked by moderator.]

[mars lewis]

All 1099s must be included with your tax forms. You just can't pick and choose. IRS wants to know anything reported as income. Adobe and PayPal both report the same income. It's reported twice. Two times. Results in being double taxed.

Google it.

The problem is that neither Adobe or PayPal wish to do anything to alleviate this scenario. Shouldn't be that way. 

[Jill_C · Accepted solution]

Both Adobe and Paypal are doing what they are required to do BY LAW. The problem appears to be with the implementation of the law. As others have said here, consult your tax preparer.