Sponsors (32)
The bill reduces paperwork and compliance costs for many small and casual sellers and narrows payor reporting, but it does so at the cost of reduced IRS visibility and added operational complexity for payors, with risks of mid‑year withholding shocks and potential fairness/enforcement consequences.
Small-volume sellers (casual sellers and many small businesses) will no longer face 1099-style reporting unless they exceed $20,000 and 200 transactions, reducing paperwork, paperwork-driven errors, and compliance costs for those sellers.
Third-party payors and the IRS face a narrower set of reportable settlement payments, cutting overall reporting burden and simplifying compliance for payors and tax administration.
The bill provides transitional certainty (a retroactive effective date and a prior‑year grandfathering rule) that prevents abrupt reporting changes and interim disruptions for payees and payors.
Many peer‑to‑peer and marketplace transactions falling below the thresholds will reduce IRS visibility into those payments, making detection of unreported income and tax enforcement harder.
Payors and payment processors must track per‑payee transaction counts and running dollar totals in real time, increasing operational, systems, and compliance costs for financial institutions and processors.
If a payee crosses the transaction or dollar threshold mid‑year they can suddenly face backup withholding or new reporting obligations, creating cash‑flow and administrative problems for those payees.
Based on analysis of 3 sections of legislative text.
Introduced March 5, 2025 by Carol Devine Miller · Last progress March 5, 2025
Restores a de minimis reporting rule for third-party settlement organizations so they must file reporting only when a payee’s third-party network transactions in a year exceed $20,000 and more than 200 transactions. It also applies the same two-part threshold to determine when such payments trigger backup withholding, with a limited exception if the payee had reportable payments in the prior year. The reporting change is treated as if it had been included in the earlier relief provision, and the backup withholding rule applies to calendar years beginning after December 31, 2024.