Track PayPal Income Without the 1099-K Headache
Your PayPal 1099-K reports the gross. What you withdrew is net of fees. ExpenseBot logs your PayPal income, separates the deductible fees, and reconciles to your bank — so your books match what you actually banked, not the form.
No credit card. Works with the Gmail and Google Sheet you already use.
The 1099-K trap: gross vs. net
Every PayPal seller runs into the same mismatch. PayPal pays you your withdrawals net — each payment already has PayPal's fee (typically around 3% plus a fixed amount per transaction) taken out. But the 1099-K PayPal files reports your gross: every dollar your buyers or clients sent, before the cut. The 1099-K number is always bigger than your bank statement.
Put that gross figure on your return and forget the fees, and you pay tax on money PayPal kept. The fix isn't to under-report — it's to report the gross and deduct the fees so the two reconcile. That's the reconciliation ExpenseBot does for you. (Educational, not tax advice.)
How ExpenseBot tracks PayPal income
It runs on the same capture engine as our Gmail receipt scanner — so your PayPal income and your business expenses land in the same place. See the full picture on the income & expense tracker.
PayPal fees are a real, defensible deduction
Transaction fees are an ordinary, necessary business expense, which makes them fully deductible. In the US they belong on Schedule C Line 10 (Commissions and fees); in Canada they typically sit on T2125 Line 9270 (Other expenses) or Line 8521. Splitting them onto their own line keeps your gross income matched to the 1099-K while the fees subtract out, so you're taxed on your real net rather than the gross the form shows.
See profit, not just payments
With income and expenses in one place, ExpenseBot answers the question PayPal's activity feed can't: are you actually making money? Tag income and costs by client and you get profit by client — real net after fees, per customer, per month. Ask the chat "profit this quarter" and it nets your PayPal income against your expenses automatically.
Taking payments through more than one processor? The same reconciliation applies everywhere. If you also run Stripe income, track both in one place, and read the deeper walk-through of multi-platform 1099-K reconciliation. Recurring billing? See the subscription tracker.
Make your books match what you actually banked
Start free, connect Gmail, and watch your PayPal payments come in already split into gross, fees, and net — reconciled to your withdrawals and ready for your accountant. Everything lives in your own Google Drive.
PayPal income & taxes — FAQ
Why is my PayPal 1099-K bigger than what I withdrew?
Because the 1099-K reports GROSS payments — every dollar your buyers or clients sent — while what you withdrew is NET of PayPal's fee (typically around 3% plus a fixed amount per transaction). They're two different figures, and the 1099-K is the larger one. Report the gross without deducting the fees and you're taxed on money PayPal kept. ExpenseBot logs the gross income and separates the fee so your books reconcile to your actual withdrawals.
Can I deduct PayPal fees on my taxes?
Yes. PayPal's transaction fees are an ordinary, deductible business expense. In the US they go on Schedule C Line 10 (Commissions and fees); in Canada they typically fall on T2125 Line 9270 (Other expenses) or Line 8521. Tracking them separately means your gross income can still match the 1099-K while the fees subtract out, so you're taxed on your real net.
How does ExpenseBot track PayPal income?
Connect Gmail and ExpenseBot's scan picks up PayPal payment and payout emails automatically, logging each as income by source. In the Income by Source report (My Reports → Summaries) each row shows a Type column (the 1099 form the platform reports on) and a Net column (gross minus fees). A (your data) badge means the fee came from the email or a rule you set; (estimated) means ExpenseBot used a typical rate — click to enter your exact rate.
Does it separate PayPal business income from personal transfers?
That's the reconciliation you control. PayPal's 1099-K covers goods-and-services (business) payments, not friends-and-family transfers. ExpenseBot logs the payments it finds as income and lets you confirm or exclude rows, so personal transfers don't inflate your business income. When in doubt, your PayPal statement and your Income by Source report go to your accountant together.
What's the current 1099-K threshold for PayPal?
For 2026 the federal 1099-K threshold reverted to $20,000 in gross payments AND more than 200 transactions after the One Big Beautiful Budget Act repealed the planned lower thresholds. Several states set lower thresholds (for example MA and MD at $600, NJ at $1,000), so you may receive a 1099-K below the federal line. The reconciliation is the same either way: report the gross, deduct the fees. Educational only — confirm with your accountant.
Do I need accounting software to do this?
No. ExpenseBot works on the Gmail and Google Sheet you already use. Your PayPal income, business expenses, and fee breakdown live in your own Google Drive, and the exports come out Schedule C / T2125 ready — nothing new to log into and nothing leaves your Google account.