Compliance
Compliance Check: Reporting Requirements for Third-Party Settlement Transactions Under OBBB
With the OBBB changes, third-party settlement organizations must now understand when to file 1099-K and perform backup withholding—only when certain thresholds are met.
By NomadicTax Research Team • 5-8 min read • April 11, 2026
## What Changed Under the One, Big, Beautiful Bill
OBBB made key changes to payment reporting through third-party settlement organizations (TPSOs):
- For **Form 1099-K**, the reporting threshold reverted to pre-American Rescue Plan Act levels. That means **reporting is only required when payments exceed **$20,000** and transaction count exceeds **200** in a calendar year. ([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))
- Proposed regulations published in early 2026 clarify backup withholding obligations. TPSOs generally must perform backup withholding only if both the **gross amount** and **number of transactions** thresholds are exceeded. ([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))
## Key Obligations for Businesses & TPSOs
- **Track payments carefully**: Keep records of both amount and number of transactions with each payee over the year.
- **Determine which payments are reportable**: Only when both criteria are met—transaction count and gross amount. If either is below threshold, TPSO may have no obligation. ([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))
- **Backup withholding**: If reporting is required, TPSOs may need to withhold backup if payee fails to provide TIN or correct information. Details clarified in proposed rulemaking. ([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))
## Compliance Examples
- **Gig platform Example**: A ride-sharing platform paid 250 drivers more than $25,000 each, but only 150 transactions per driver. Even though gross payments exceed $20,000, transaction count doesn’t exceed 200; so no 1099-K required under new thresholds. Check local rules, but federal requirement wouldn’t apply. ([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))
- **Small merchant example**: A café had 220 individual payments via payment apps totaling $21,500 to one vendor. Both thresholds met ⇒ Must issue 1099-K and may need backup withholding if documentation missing. ([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))
## Actionable Steps to Ensure Compliance
- Update internal reporting systems to count transactions and aggregate amounts for each payee.
- Educate staff or platforms about needing taxpayer identification information (TIN) from payees to avoid backup withholding penalties.
- Monitor upcoming regulations—though proposed, some rules may be finalized soon affecting processes. Agencies are soliciting comments now. ([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))