House tax bill proposes changes to information reporting rules

As expected, the bill would reinstate the de minimis threshold for Form 1099-K reporting by third party settlement organizations to the $20,000 and 200 transaction levels that existed prior to the 2021 amendments to section 6050W.¹ Consistent with H.R. 7024, as passed by the House in 2024, the information reporting threshold for payments reportable under sections 6041 and 6041A, would increase, from the current $600 to $2,000, which would be indexed for inflation.²

In addition, several new information reporting requirements would be added to support substantive provisions in the bill such as no tax on tips, overtime, or car loan interest, and the proposed excise tax on remittance transfers.

Proposed Increase in the de Minimis Threshold for Reporting Third Party Network Transactions on Form 1099-K

In 2021, the de minimis threshold for reporting third party network transactions was reduced from $20,000 and 200 transactions to $600, with no minimum number of transactions.³ Third party settlement organizations such as online marketplaces were required to report the gross proceeds of all transactions on Form 1099-K at the lower thresholds. Payments reportable on Form 1099-K were also subject to backup withholding under section 3406 if the payee failed to furnish a taxpayer identification number.

Through a series of notices, the IRS provided for transition relief, such that the Form 1099-K threshold was unchanged for calendar years 2022 and 2023, was $5,000 for calendar year 2024 and $2,500 for calendar year 2025.

The bill would revert to the pre-amendment de minimis thresholds of $20,000 and 200 transactions. The backup withholding dollar threshold would also conform to the new de minimis threshold. However, the de minimis threshold would not apply to any payee during any calendar year if one or more payments in settlement of third party network transactions made by the payor to the payee during the preceding calendar year were reportable payments.

The reinstatement of the higher de minimis threshold would apply to returns for calendar years beginning in 2022. The change to backup withholding would be effective for calendar years beginning in 2025.

Proposed Increase in the Information Reporting Thresholds Under Sections 6041 and 6041A

The bill would increase the information reporting threshold for certain aggregate payments made during a calendar year to persons engaged in a trade or business reportable under section 6041 and payments of remuneration for services reportable under section 6041A from $600 to $2,000. This provision of the bill would be effective for payments made after December 31, 2025. The $2,000 threshold would be indexed for inflation. The bill would make a parallel change to the section 3406 backup withholding dollar threshold to conform with the new $2,000 reporting threshold.

Returns required under section 6041 include the Forms 1099-MISC, 1099-NEC, and 1099-INT (with respect to interest not reportable under section 6049).

A number of other information returns would not be affected by the change, including, for example:

• Form 1099-DIV, required under sections 6042(a) and section 6043(a)(2) ($10 threshold reporting amount for dividends)
• Form 1099-B, required under section 6045 ($10 threshold reporting amount for amounts received by brokers and barter exchange transactions)
• Form 1099-R, required under section 6047(d) 
• Form 1099-INT, as it relates to interest reportable under section 6049 ($10 threshold reporting amount)
• Form 1099-MISC, as it relates to royalties reportable under section 6050N(a) ($10 threshold reporting amount) 
• Form 1099-C, required under section 6050P
• Form 1099-MISC as it relates to payments to attorneys reportable under section 6045(f)

Proposed Additional Information Reporting Requirements

The bill also sets forth additional reporting requirements with respect to the following:

• Reporting qualified tips and qualified overtime compensation on Forms 1099-NEC, 1099-K, and W-2
• Reporting of remittance transfers subject to excise tax (no threshold reporting amount)
• Reporting of applicable passenger vehicle loan interest ($600 threshold reporting amount)

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_{1 Unless otherwise stated, all section references are to the Internal Revenue Code of 1986, as amended (Code), and all “Treas. Reg. §” references are to the regulations promulgated thereunder by the Department of the Treasury (the Treasury Regulations or the Regulations) as in effect as of the applicable taxable year, as relevant. 
2 H.R. 7024, 118th Congress. H.R. 7024 would have increased the threshold to $1000.
3 American Rescue Plan Act, Pub. L. No. 117-2, § 9674 (2021).}