Global Daily Tax News, US Finalizes Backup Withholding Rules For Settlement Organizations, (Aug 18, 2026)

The US Treasury Department and the Internal Revenue Service have finalized regulations that revise the threshold for when certain third-party settlement organizations are required to perform backup withholding to comply with changes made in the One, Big, Beautiful Bill.

The final regulations provide clarity on backup withholding and provide that third-party settlement organizations generally are 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 USD20,000 and the number of transactions exceeds 200.

Under changes enacted in the OBBB, the threshold for filing Form 1099-K reverted to the reporting threshold in effect prior to the enactment of the American Rescue Plan Act of 2021, and provided that reporting on payments settled through third-party payment networks is only required where the gross amount of reportable payment transactions to a payee exceeds USD20,000 and the number of transactions exceeds 200.

The provisions apply to payments made in calendar years beginning after December 31, 2024.