The IRS has issued new guidance formalizing the $5,000 threshold for reporting 2024 payments made through third-party payment networks on Form 1099-K and has set a new $2,500 threshold for payments made in 2025. 

IRS Notice 2024-85 provides that calendar years 2024 and 2025 will be regarded as the final transition period for purposes of IRS enforcement and administration of the minimum reporting threshold for Form 1099-K, Payment Card and Third Party Network Transactions. Under Notice 2024-85, a third party settlement organization (TPSO) will be required to report payments in settlement of third party network transactions with respect to a participating payee when the amount of total payments for those transactions is more than $5,000 during calendar year 2024; more than $2,500 during calendar year 2025; and more than $600 during calendar year 2026 and after. Notice 2024-85 also provides that for calendar year 2024, the IRS will not assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax during the calendar year. 

The reporting threshold under Section 6050W had been set to be reduced to $600 for payments made in 2025 under a long-delayed change that was originally scheduled to take effect in 2022. The IRS has repeatedly offered transition relief, though it warned taxpayers that it plans to allow the $600 threshold to take effect in 2026. 

The $2,500 threshold for 2025 may offer relief to some taxpayers who would face more reporting obligations under a $600 threshold. The payment reporting requirements under Section 6050W can affect a wide variety of platforms and services, including auction houses, consignment sellers and other applications and platforms that connect customers to sellers of goods or services. 

There is no de minimis exception for payment card reporting under Section 6050W, and third-party settlement networks may still be required to report at the $600 threshold for 2024 if backup withholding is required. Legislation affecting the thresholds remains possible.  

Notice 2024-85 will be in IRB: IRB 2024-51, dated Dec. 16, 2024.