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New 1099-K thresholds for third-party reporting

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Tax Hot Topics newsletter The IRS recently revised Form 1099-K, Payment Card and Third-Party Network Transactions, to reflect changes the new lower reporting thresholds for third-party payment networks under the 2021’s American Rescue Plan Act (ARPA).

The 1099-K is used by payment settlement entities to report payment card transactions and third-party payment network transactions to merchants. The reporting requirements of merchant acquiring entities, such as banks or other organizations that process payment card transactions on behalf of a merchant, remain unchanged by ARPA. These entities must report the gross amount of reportable transactions of any payee for whom they settle payment card transactions with no de minimis threshold.

Prior to ARPA, the third-party settlement organizations that settle payments as part of a payment settlement network, only had to file 1099-Ks for payees with over 200 transactions and an aggregate gross payment amount over $20,000 for the calendar year. Under APRA, TPSOs are now required to report all transactions for goods or services that exceed $600 for the calendar year—even if the payees are only involved in one transaction. Because of this change, TPSOs will be required to file significantly more Form 1099-Ks.

The changes to Form 1099-K are effective beginning Jan. 1, 2022. Statements to recipients generally must be issued on or before Jan. 31, 2023, while Forms must generally be electronically filed to the IRS by March 31, 2023.

Contact:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

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