Today, in Notice 2023-10, the IRS announced a delay in the new reduced reporting threshold for section 6050W applicable to third-party settlement organizations (TPSOs).  Section 9674(a) of the American Rescue Plan Act of 2021 amended section 6050W(e) to provide that, for returns for calendar years beginning after December 31, 2021, a TPSO is required to report payments in settlement of third party network transactions with respect to any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the aggregate number of such transactions.  Prior to the change, the threshold was $20,000 and 200 transactions. 

Under Notice 2023-10, calendar year 2022 will be regarded as a transition period for purposes of IRS enforcement and administration of the modified de minimis exception for TPSOs and third party network transactions. With respect to information returns for 2022, the pre-ARPA thresholds of $20,000 and 200 transactions will remain in effect.  Accordingly, the IRS will not assert failure to file or failure to furnish penalties under sections 6721 and 6722, respectively, with respect to 2022 Forms 1099-K unless the pre-ARPA thresholds were exceeded.  However, TPSOs that have performed backup withholding under section 3406(a) during 2022 must file a Form 1099-K with the IRS and furnish a copy to the payee if total payments to and withholding from the payee exceeded $600 for the calendar year.  Returns for 2023 will be subject to the new reporting threshold of $600 without regard to the number of transactions.

Concurrent with its issuance of Notice 2023-10, the IRS also published News Release IR-2022-226 regarding the delay.  In the news release, the IRS promises to provide additional details on the delayed reporting threshold to help taxpayers and the industry.  Regarding taxpayers who may have already received a Form 1099-K as a result of the statutory changes, the IRS states that it is working rapidly to provide instructions and clarity so that taxpayers understand what to do.  The IRS notice and news release do not address situations in which filers have already taken steps necessary to implement the lower reporting threshold contemplated under section 6050W(e).  However, filers that report consistent with the requirements of section 6050W(e) should not be subject to any penalties for doing so.

Photo of Michael M. Lloyd Michael M. Lloyd

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits…

Michael Lloyd practices in the areas of tax and employee benefits with a focus on information reporting and withholding on cross-border payments (e.g., Forms 1042 and 1042-S) and Foreign Account Tax Compliance Act (FATCA), backup withholding, employment taxation, the treatment of fringe benefits, cross-border compensation, domestic information reporting (e.g., Forms W-2, 1099, 1095 series returns), penalty abatement, and general tax planning and controversy matters. Mr. Lloyd advises large U.S. and foreign multinationals regarding compliance with information reporting and withholding issues, as well as a range of other federal and state tax issues.

Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.