Recently proposed regulations from the IRS reflect changes to the Sec. 3406 backup withholding threshold made by H.R. 1, commonly known as the One Big Beautiful Bill Act.
The proposed regulations provide clarity on backup withholding and would stipulate that third-party settlement organizations — for example, PayPal or Venmo — are generally 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.
The IRS also reminded taxpayers that backup withholding and reporting thresholds do not affect whether the income is taxable. Read more.