Compliance
Backup Withholding: What Gig Economy Workers Need to Know under OBBB
Proposed regulations under the One, Big, Beautiful Bill (OBBB) change the 1099-K reporting threshold, easing reporting burden for many gig and platform-based workers.
By NomadicTax Research Team • 5-8 min read • April 26, 2026
## Overview
Under the OBBB, proposed regulations change when third-party settlement organizations are required to perform **backup withholding** on payments, including those reported on Form 1099-K. These changes may benefit gig economy workers, freelancers, and small sellers.
## Key Changes
- The threshold for requiring payment platforms to perform backup withholding now generally requires that both of the following are met in a calendar year: **payments exceed $20,000** *and* **number of transactions exceed 200**. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
- This replaces the prior rule under which the reporting threshold had been set at much lower amounts, causing many small-volume providers to be subject to complex reporting requirements. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
- These rules are **proposed regulations**, open to comments from stakeholders. Once finalized, they will dictate compliance requirements. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
## Who Is Affected
- Individuals who receive income via payment platforms (e.g., ride-share, online sales, delivery services).
- Sellers with many small transactions may still cross both thresholds — even if the dollar total is modest, the transaction count matters. Conversely, someone with a few large payouts but fewer than 200 transactions may avoid backup withholding.
- Platforms must track both metrics: **total annual payments** to each payee and **number of transactions**, to determine when withholding kicks in. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
## Examples
- *Case A*: Sam delivers for a ride-share app and earns \$18,000 in 150 transactions in a year — **no backup withholding** required under proposed rule (doesn't meet both thresholds).
- *Case B*: Lee sells custom crafts online, does 250 orders totaling \$18,000 — meets the transaction threshold but not the dollar threshold — still **no backup withholding** required.
- *Case C*: Mia has 300 transactions totaling \$25,000 — hits both thresholds — **backup withholding applies** unless there’s valid taxpayer identification and documentation.
## Actionable Advice
- Monitor your annual income and number of payment transactions through platforms. Use your accounting software or platform statements to track both.
- If you look like you’ll cross both thresholds, ensure your taxpayer identification number (TIN) is correct on file with platforms, or you risk backup withholding.
- Platforms should prepare their systems now to collect necessary data on both payment totals and counts.
- Stay alert for the **final regulations** — proposed rules may change based on public feedback. For now, this serves as guidance. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
## Implications
- Lower reporting burdens for many gig workers who do many small transactions but not large dollar amounts.
- Simplifies tax compliance for individuals and platforms alike by restoring a threshold that was in place before the American Rescue Plan Act of 2021. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-reflecting-changes-from-the-one-big-beautiful-bill-to-the-threshold-for-backup-withholding-on-certain-payments-made-through-third-parties?utm_source=openai))
- However, for those exceeding both thresholds, attention to paperwork, accurate reporting, and documentation is still critical.
**Bottom line**: If you're gig-working, freelancing, or selling online, this change may reduce your backup withholding exposure — but keep your transaction count and income in sight, and prepare if you seem likely to cross both thresholds.