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)
- 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)
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)
- 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)
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)
- 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)
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)