The IRS has issued guidance (Notice 2023-10) that postpones the new $600 reporting threshold for third-party payment networks under Section 6050W that had become effective for payments in 2022 under the American Rescue Plan Act of 2021 (ARP).
Under the guidance, taxpayers will generally only be required to report 2022 payments for payees with more than 200 transactions and $20,000 in aggregated payments — the threshold in effect before ARP was enacted. However, taxpayers that applied backup withholding on any payees must still perform the reporting if the payment and withholding amounts each exceeded $600.
Section 6050W generally requires payment settlement entities to report payment card transactions and third-party payment network transactions to sellers on Form 1099-K. ARP had repealed the 200 transaction and $20,000 de minimis thresholds effective Jan. 1, 2022, and replaced them with a $600 threshold. Notice 2023-10 provides that the old thresholds will remain in effect for transactions in 2022, while the new $600 threshold will take effect in 2023. There is no de minimis exception for payment card reporting under Section 6050W.
There is significant bipartisan support for legislatively raising the $600 threshold effective for 2023 transactions, but enactment is far from guaranteed. Third-party settlement organizations should be preparing to perform the reporting based on the $600 threshold for all payments on or after Jan. 1, 2023. Taxpayers should also be applying backup withholding on any payees who have not provided a Taxpayer Identification Number (TIN), or as required for incorrect TINs that are not remedied through the B Notice process.
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