What if You Receive Two Form 1099s Reporting the Same Income?

by Kristine on January 25, 2012

One of my concerns about the new 1099-K form is that people may receive two 1099s for the same income.  For example, lets say you are a graphic-designer and you use PayPal to process payments you receive. 

You could receive a 1099-K from PayPal (assuming you earn over $20,000 and you have more than 200 transactions).  In addition, you could receive a 1099-MISC from one or more of your customers.

The problem is that both 1099 forms are reporting the same income.  So you could earn $40,000 in any given tax year, and receive 1099 forms reporting $60,000!

How do you report your income on your tax return if this happens?  There’s actually a pretty easy solution.  

First, report the total income reported on 1099-K forms you received on line 1a of Schedule C (note: for 2011 only, you will use 1b instead of 1a to report 1099-K income).  Second, report all income reported on 109-MISC plus all income you earned that was not reported on a 1099 on line 1b. 

If you find that your income was double reported you can adjust your reportable income by entering a negative item for the amount that was double reported on line 6 – Other Income.

Using the same example above, let’s assume that your gross income for 2011 was $40,000.  You received a 1099-K from PayPal for $25,000, a 1099-MISC from your largest customer for $10,000, and several more 1099-MISC forms adding up to $13,000. You also earned $5,000 that was paid to you directly (cash or check), that you did not receive either a 1099-K or 1099-MISC form for.

You will report:

Line 1a: $25,000 (from the 1099-K you received from PayPal)
Line 1b: $23,000 (from the 1099-MISC forms you received) + $5,000 (any income not reported on a 1099)

Total Gross Receipts: $53,000

As you can see your total gross receipts are too high because you had income that was double reported (on both a 1099-K and 1099-MISC).  To correct this, enter a negative number on line 6 – Other Income as follows:

Line 6: Other Income ($13,000)

Your gross income (line 7) after making this adjustment will be $40,000.

By reporting your income this way your tax return will match the IRS’ records of 1099s you received, and you will not be over-reporting your income. 

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