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to be disregarded. Disregarding the Under the new rules, the threshold gig-economy services are TPSOs for
transaction, at a minimum, would relieve for the information reporting require- Form 1099-K reporting purposes.
taxpayers from the burden of complying ment will decrease to $600 (for any A third-party payment network is
with the complex coordination regula- number of transactions), effective for any agreement or arrangement that:
tions. It remains to be seen whether 2022 Forms 1099-K (due to be filed ■ Involves the establishment of
this letter ruling reflects a broader in 2023). accounts with a central organization
willingness on the part of the IRS to by a substantial number of providers
allow other types of relief in response to Background of goods or services (generally con-
retroactive regulations. Under Sec. 6050W, a payment settle- sidered to be more than 50) that are
From Allen Stenger, J.D., and Jane ment entity that makes a reportable unrelated to the central organization
Vukmer, J.D., Washington, D.C. payment to a participating payee must and have agreed to settle transactions
meet certain information reporting for the provision of goods and
requirements on Form 1099-K. A re- services with purchasers according to
Practice & Procedures portable payment can result from a pay- an agreement or arrangement;
ment card transaction or a third-party ■ Provides standards and mechanisms
Form 1099-K information network transaction. for settling such transactions; and
returns: New rules beginning Payment card transactions are ■ Guarantees payment to the providers
2022 usually reported by banks acting as of goods and services in settlement of
The American Rescue Plan Act of 2021 merchant-acquiring entities, which pro- transactions with the purchasers.
(ARPA), P.L. 117-2, recently lowered cess credit card transactions on behalf There is an exception from reporting
the de minimis threshold for information of a merchant. There is no de minimis by TPSOs for payments made through
reporting on third-party network trans- dollar threshold for reporting payment an electronic payment facilitator (EPF).
actions. This change will substantially card transactions. When a TPSO contracts with an EPF
increase the number of Forms 1099-K, Third-party settlement organizations to make payments in settlement of
Payment Card and Third Party Network (TPSOs) are generally marketplaces that third-party network transactions on
Transactions, required to be filed with connect buyers and sellers of goods or behalf of the TPSO, that EPF must file
the IRS and furnished to recipients by services. Transactions settled by TPSOs the applicable Forms 1099-K instead of
third-party settlement organizations and are third-party network transactions. the TPSO. There is no requirement that
their electronic payment facilitators. Many web 2.0 e-commerce websites and the EPF have any agreement or arrange-
ment with the participating payee, and
the payment need not be made directly
from an EPF’s account; an EPF need
only submit instructions to transfer
funds to the account of the participat-
ing payee in settlement of the report-
able transaction.
A Form 1099-K filer must report the
gross amount of reportable transactions
for each month and for the entire year in
separate boxes on the Form 1099-K. In
addition, a filer must obtain each payee’s
taxpayer identification number (TIN)
before making a reportable payment, or
the filer must impose backup withhold-
ing at a rate of 24% on the gross amount
PHOTO BY ARISSU/ISTOCK there is no specific method by which a
of the payment. As of this writing,

payee’s TIN must be collected; however,
a provision in the Biden administra-
tion’s proposed budget, if enacted, would
require Form 1099-K filers to collect

www.thetaxadviser.com January 2022 13