Sponsors (9)
This bill reduces reporting and withholding burdens for many low-volume sellers and clarifies withholding rules for payors, but it does so at the cost of reduced IRS transaction visibility, potential administrative and retroactive complications, and some cash‑flow and fairness risks for payees and processors.
Small merchants and individual sellers (low-volume payees) will face less paperwork and fewer instances of backup withholding because TPSOs only report and withholding applies when a payee exceeds both the $20,000 AND 200-transaction thresholds.
Third-party settlement organizations (payment platforms/pay processors) will have a reduced reporting burden and clearer scope of obligations because reporting is limited to payees who exceed both thresholds.
Payors and payment processors get clearer rules on when to apply backup withholding to third‑party network settlements, lowering compliance uncertainty for those firms.
The IRS will receive substantially less transaction-level data from TPSOs, reducing its visibility into small-dollar activity and potentially making it harder to detect unreported income (increasing the tax gap).
Retroactive application or changes to reporting could complicate tax administration and create uncertainty for taxpayers and TPSOs about prior-year compliance and required adjustments.
Payees who exceed thresholds late in the year may face sudden backup withholding once both thresholds are met—creating disruptive, unexpected cash-flow problems for small businesses and individuals.
Based on analysis of 3 sections of legislative text.
Introduced April 9, 2025 by William Francis Hagerty · Last progress April 9, 2025
Reinstates a higher "de‑minimis" reporting threshold for third‑party payment processors so they must report transactions for a seller only when the seller’s transactions both exceed $20,000 in total and exceed 200 transactions in a year. It also clarifies that payments settled through third‑party networks are subject to backup withholding only when a payee exceeds those same two thresholds in the calendar year (with a narrow exception if the payee had reportable payments the prior year). The backup‑withholding rule applies to calendar years beginning after December 31, 2024, while the reporting threshold restoration is applied as if it had not been changed by the earlier pandemic‑era amendment.