The IRS is providing transition relief for third-party settlement organizations (TPSOs), also known as payment apps and online marketplaces (e.g., Venmo, Amazon, etc.), regarding transactions during calendar years 2024 and 2025. (IRS Notice 2024-85) Although the American Rescue Plan Act required that TPSOs file 1099-Ks for all amounts paid to a payee if they exceed $600 in aggregate beginning with the 2022 calendar year, the IRS has previously delayed implementation.
According to the IRS’s latest guidance, TPSOs must file 1099-Ks to report transactions when the amount of total payments for those transactions is more than:
- $5,000 in 2024;
- $2,500 in 2025; and
- $600 in calendar year 2026 and after.
In addition, the IRS will not assert penalties under IRC §6651 or §6656 for a TPSO’s failure to withhold and pay backup withholding tax during the 2024 calendar year.
TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.
For calendar year 2025 and after, the IRS will assert penalties under §6651 or §6656 for a TPSO’s failure to withhold and pay backup withholding tax.
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