Treasury and IRS issue final regulations on backup withholding on third party network transactions

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Treasury and IRS issue final regulations on backup withholding on third party network transactions

August 11, 2026

United States
United States
United States
The Department of the Treasury and Internal Revenue Service have issued final regulations (TD 10053) that revise the threshold for backup withholding on payments made by third party settlement organizations in settlement of third-party network transactions to align the threshold with the de minimis reporting threshold under section 6050W(e). The final regulations adopt, without change, the proposed regulations that were published on January 9, 2026.

As discussed more fully in our prior alert, the One Big Beautiful Bill Act (OBBBA) amended section 3406 to align the backup withholding provisions applicable to third party network transactions with the de minims exemption under section 6050W(e) (i.e., no Form 1099-K reporting required with respect to a third party network transaction if payments to a payee do not exceed $20,000 and 200 transactions in a calendar year). Specifically, a payment made pursuant to a third party network transaction would be treated as a reportable payment for purposes of section 3406 only if the payments to the payee exceed $20,000 and 200 transactions in a calendar year. Consistent with the proposed regulations, the final regulations revise the regulations under section 3406 to be in conformity with the OBBBA amendment. 

The final regulations apply with respect to payments made in calendar years beginning after December 31, 2024.

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