IRS issues final regulations for Sec. 3406 backup withholding rules

The IRS recently published final regulations that reflect changes to the Sec. 3406 backup withholding threshold made under H.R. 1, commonly referred to as the One Big Beautiful Bill Act.

Under the final regulations, third-party settlement organizations — for example, PayPal or Venmo — generally are not required to backup-withhold on payments settled through third-party payment networks unless the gross amount of reportable payment transactions to a payee exceeds $20,000 and the number of transactions exceeds 200.

H.R. 1 also amended Sec. 6050W to revert the threshold for filing Form 1099-K, Payment Card and Third-Party Network Transactions, to those same reporting thresholds. Read more.