As a seller on Drip, it’s important to understand how IRS tax reporting works for payments you receive through PayPal. Whether or not you receive a 1099-K form depends on federal and state reporting thresholds and your total payment activity during the calendar year.
When does PayPal issue a 1099-K?
For federal tax reporting, PayPal is required to issue a 1099-K if both of the following thresholds are met in a calendar year:
$20,000 or more in gross payments for goods and services, and
200 or more transactions
If you do not meet both thresholds, you may not receive a 1099-K from PayPal. This is normal and expected.
Note: Some U.S. states have lower reporting thresholds, which may result in a 1099-K being issued even if federal thresholds are not met.
How does this affect Drip sellers?
Since Drip uses PayPal to process seller payouts, PayPal is responsible for issuing any required tax forms. If your PayPal account meets reporting thresholds, PayPal will issue a 1099-K and file the same information with the IRS.
The 1099-K reports gross payment volume and does not account for fees, refunds, chargebacks, or expenses.
Important tax reminder
You are required to report all taxable income on your tax return even if you do not receive a 1099-K. The 1099-K is an informational form and does not determine your final tax liability.
For questions about your specific tax situation, consult a qualified tax professional.
Note: Some of the payments reported on the 1099-K may not necessarily be taxable (e.g., personal items sold at a loss or refunds), so it’s important to consult a tax professional for assistance in determining your taxable income.