The update issued on October 23, 2025, has prompted concerns among taxpayers who receive payments through Third Party Settlement Organizations (TPSOs). Many are wondering whether the revised reporting rules mean they will be exempt from receiving Form 1099-K if their gross payments are $20,000 or less or if their annual transactions do not exceed 200.
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Federal Threshold Is Not a Limitation
The federal reporting requirement of over $20,000 in total payments and more than 200 transactions applies to TPSOs when determining whether they must issue Form 1099-K. However, this guideline does not prohibit them from reporting lower amounts. TPSOs may still furnish Form 1099-K for goods or services even if payments fall below these federal thresholds.
Reporting by Merchant Acquiring Entities
Alongside TPSOs, merchant acquiring entities also issue Form 1099-K. These entities do not have a de minimis reporting threshold, meaning they may provide a Form 1099-K regardless of how many transactions occurred or the total payment value.
Backup Withholding Requirements
If backup withholding was applied under IRC 3406(a) during the prior year, TPSOs must file Form 945 with the IRS and issue Form 1099-K to the payee. This obligation exists regardless of payment totals or transaction counts.
State Level Threshold Differences
Some states enforce their own reporting thresholds for TPSOs. If a state has a lower threshold, a payee may receive a Form 1099-K even when federal criteria are not triggered.
Conclusion
The change in OBBB’s TPSO reporting threshold does not guarantee that a taxpayer will avoid receiving Form 1099-K for lower payment amounts or limited transactions. Various federal, state, and withholding requirements may still lead to reporting. Taxpayers should remain aware of their payment activity and documentation to ensure accurate and timely tax compliance.
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