We have a small business providing administrative support to clubs putting on dog shows. This involves among other things collecting entry fees. Most of the fees are sent by mail with checks made out to the club. We also provide a means of entering online with payment made through PayPal. The funds therefore come to us, and we write a check to the club for these amounts. Now this year we received a form 1099-K showing these payments coming to us with a copy going to IRS.
I'm not sure how to handle this. Instructions for Schedule C Line 1 say "For
2011, you are not required to report income received via merchant card or third party network payers, so enter 0 on line 1a and report all income, regardless of how it was received, on line 1b". For Line 1b, instructions say "Enter on line 1b all gross receipts from your trade or business".
Should I include these amounts on line 1b and then try to explain why they are not taxable income to me in Part V Other Expenses?
Jim Craig Sierra Vista, AZ