Compliance
Compliance Checklist: Backup Withholding Thresholds and Digital Reporting under OBBB
Ensure your business or online platform meets the new reporting and backup withholding thresholds under the OBBB to avoid penalties when using third-party networks.
By NomadicTax Research Team • 5-8 min read • February 18, 2026
## What Changed for Third-Party Payments
Under the OBBBA, the threshold for reporting payments made through **third-party settlement organizations** (e.g. payment apps, marketplaces) reverted to a **higher threshold**: both **more than $20,000 in payments** *and* **more than 200 transactions** 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))
## Why It Matters for Backup Withholding
Backup withholding is a mechanism where payers must withhold federal tax when certain reporting thresholds are met. Under the proposed regulations:
- You’ll meet the threshold only if **both** volume ($20,000+) and count (200+ payments) are satisfied. ([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))
- If you fall below both, withholding generally does **not** apply. This can lower your compliance costs. ([irs.gov](https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions?utm_source=openai))
## Practical Action Steps
- If you're a **seller or payee** receiving payments, review your total number of transactions and dollar volume for the year. If you expect to exceed both, prepare to provide required tax information (TIN/SSN).
- If you're a **payment platform** or third-party settlement organization, begin tracking both metrics per payee: transaction count & gross payment. Update reporting processes. This is already in proposed regs; final regs may impose stricter compliance. ([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))
- Stay alert: the regulations are **proposed** and comments are open. Final rules may change thresholds, exceptions, or effective dates. ([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))