The US Department of the Treasury and the Internal Revenue Service (IRS) have released draft rules to change the threshold when certain third‑party settlement organisations must apply backup withholding, following amendments in the One, Big, Beautiful Bill.
Under the draft approach, third‑party settlement organisations would generally not need to withhold on payments processed through third‑party payment networks unless the total value of reportable transactions is more than $20,000.
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The proposed change will also allow the organisations to withhold payments if the transaction count is more than 200.
The agencies have invited feedback on the proposal from interested parties.
The IRS has also noted that, because of the One, Big, Beautiful Bill, the Form 1099‑K filing threshold has returned to the level used before the American Rescue Plan Act of 2021.
This means reporting for payments handled through third‑party payment networks is required only when the payee’s reportable transactions exceed $20,000 in gross amount and exceed 200 transactions.
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By GlobalDataThe IRS has reiterated that these reporting and withholding thresholds do not determine whether income is taxable.
Earlier this month, the American Institute of CPAs called on the IRS to adopt an automated process for dealing with applications to extend deadlines for taxpayers impacted by disasters declared at federal level.
This relates to cases where a taxpayer requires extra time to replace property lost through an involuntary conversion under section 1033 of the Internal Revenue Code. The AICPA said a more structured approach would help limit uncertainty for taxpayers seeking additional time.
