Recent IRS Compliance Updates
Two major updates from the IRS affect compliance for payors and lenders under the One, Big, Beautiful Bill:
- Form 1099-K Reporting Threshold Reversion: As per Fact Sheet 2025-08, third-party settlement organizations must report on 1099-K only if both:
• Gross payments to a payee exceed $20,000, and
• The number of transactions exceeds 200.
This reverts to pre-ARPA thresholds. (irs.gov) - Car Loan Interest Reporting & Relief: Under section 6050AA, recipients of interest on qualified passenger vehicle loans must file information returns when they receive $600 or more from an individual. For 2025, IRS offers transitional relief: lenders who provide statements of interest received by Jan. 31, 2026, via acceptable methods, will not face penalties. (irs.gov)
Key Deadlines & Thresholds at a Glance
| Rule | Reporting Threshold | Deadline | Penalties Relief Available? |
|---|---|---|---|
| Form 1099-K (third-party payments) | > $20,000 and > 200 trans. per payee | Filed annually (calendar year) | Yes under new law effective immediately retroactive to ARPA changes. (irs.gov) |
| Car Loan Interest Reporting | $600 or more interest from an individual | Statement by Jan. 31, 2026; returns as required | Penalties relief if statement provided in acceptable form. (irs.gov) |
Actionable Steps for Businesses & Payors
- Payment Settlement Entities should update systems to enforce the two-part threshold (dollar and transaction count) for 1099-K reporting. Also, understand which payments qualify and differentiate goods/services from other payments.
- Lenders & Dealerships: Ensure statements of interest (monthly, portal, or annual) are provided for QPVLI interest amounts. If interest ≥ $600, prepare for required reporting.
- Tax Preparers & Advisors: Review client financial transactions for potential reporting obligations. Advise clients who might crossover thresholds.
- Documentation & Systems Updates: Maintain accurate records, update systems now to capture transactions, interest amounts and statement issuance.
Example Situations
- Example 1: An online marketplace processes 250 payments of $150 each to a seller in 2025. Gross payments $37,500. Because both conditions (>200 transactions and >$20,000) are satisfied, a 1099-K must be issued.
- Example 2: A car dealership finances 30 qualifying loans in 2025. If any individual client pays $600+ interest, dealership must report, but if the interest statement is provided by Jan. 31, 2026 through a portal or statement, penalties are relief-protected.
Category: Compliance
TaxHome: US
Author: NomadicTax Research Team
ReadTime: 5-8 min
Published: true