Introduction
Accepting payments via Stripe and PayPal on eBay gives you flexibility and lower fees—but also adds layers to your bookkeeping, reporting, and tax compliance. This step-by-step 2025 guide shows you how to integrate, track, and report Stripe/PayPal transactions on eBay, so you never miss a deduction and always reconcile accurately.
Tax Code References
- Information Reporting (IRC § 6051): Both Stripe and PayPal issue Form 1099-K for qualifying transactions; you must reconcile these with your eBay sales records.
- Gross Income (IRC § 61): All proceeds—regardless of processor—must be included in your gross receipts.
- Ordinary & Necessary Expenses (IRC § 162): Deduct processing fees, chargebacks, and subscription costs for payment integrations.
- Inventory Costing (IRC §§ 471 & 263A): Ensure COGS calculations capture refunds and returned‐item reversals properly.
- Self-Employment Tax (IRC § 1401): Net eBay earnings—including Stripe/PayPal profits—are subject to Social Security and Medicare taxes.
Relevant Forms
- Form 1040, Schedule C: Report gross receipts (Line 1), returns/allowances (Line 4), and business expenses including processor fees (Line 27a).
- Schedule SE (Form 1040): Calculate self-employment tax on net earnings.
- Form 1099-K: Reconcile Stripe’s and PayPal’s reports against your own records.
- Form 4562: Depreciate any hardware (e.g., card readers) used for in-person payments.
- Form 1040-ES: Pay quarterly estimates on net income.
Detailed Example
Scenario: ArtisanHub sells home décor on eBay. Payments split: 60% via eBay-managed PayPal, 40% via custom Stripe checkout. In 2025:
- Gross Sales: $100,000
- Stripe Receipts: $40,000 → Processing fees (~2.9%+$0.30) ≈ $1,220
- PayPal Receipts: $60,000 → Fees (~2.7%+$0.30) ≈ $1,830
- Returns/Chargebacks: $5,000
- COGS: $45,000
Tax Treatment:
- Net Receipts: $100,000 − $5,000 returns = $95,000 on Schedule C Line 1
- Returns & Allowances: $5,000 on Line 4
- COGS Deduction: $45,000 on Line 36
- Processor Fees: $3,050 total fees on Line 27a (IRC § 162)
- Net Profit: $95,000 − $45,000 − $3,050 = $46,950
- Self-Employment Tax: Computed on $46,950 on Schedule SE
Step-by-Step Compliance Guide
- Integrate Stripe & PayPal
- Enable eBay’s managed PayPal; install a Stripe checkout app for direct sales.
- Configure Bookkeeping
- Set up separate income and expense accounts for each processor in your accounting software.
- Capture All Transactions
- Sync daily via API or download CSVs; include sales, refunds, fees, and chargebacks.
- Reconcile 1099-K Reports
- Monthly, match Stripe’s and PayPal’s 1099-K totals to your records; adjust for timing differences.
- Adjust for Returns & Chargebacks
- Record refunds as negative income; reverse corresponding COGS entries.
- Claim Processor Fees
- Deduct fees under “Other expenses” (Line 27a) on Schedule C.
- File & Pay
- Complete Schedule C and SE; pay any balance and quarterly estimates via Form 1040-ES.
- Maintain Records
- Keep processor statements, reconciliation worksheets, and refund/chargeback documentation for four years.
Conclusion
Properly tracking Stripe and PayPal on eBay ensures you report accurate net income, claim all fee deductions, and reconcile Form 1099-K without headaches. Follow these steps in 2025 to streamline your finances and stay IRS-ready.
Strong Call to Action
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Disclaimer
Anshul Goyal, CPA, EA, FCA, is a licensed CPA and IRS-admitted Enrolled Agent. He advises e-commerce sellers on payment-processor compliance and tax planning. This blog is informational and not a substitute for professional advice.
About Our CPA
With over a decade of U.S. and international tax expertise, Anshul Goyal helps Shopify and eBay merchants optimize payment workflows, maximize deductions, and stay fully compliant.
Frequently Asked Questions
1. When will I get a 1099-K from Stripe/PayPal?
Stripe and PayPal issue 1099-K if you exceed $20,000 gross payments and 200 transactions in a calendar year.
2. Can I deduct refunded transaction fees?
Yes—you still incur processing fees on the original payment; deduct under IRC § 162.
3. How do I handle reversed COGS for refunds?
Reverse the original COGS entry for returned items to maintain accurate inventory and expense records.
4. What if Stripe and PayPal 1099-Ks don’t match my books?
Investigate timing and classification differences; attach reconciliation to your return if needed.
5. How long should I keep processor records?
Maintain statements and reconciliation workpapers for at least four years.