The US Internal Revenue Service has issued Notice 2024-85 corresponding to a news release (IR-2024-299) on 26 November 2024, providing transition relief for third-party settlement organisations (TPSOs), also known as payment apps and online marketplaces, regarding transactions during calendar years 2024 and 2025.
Under the guidance, TPSOs will be required to report transactions when the amount of total payments for those transactions is more than USD 5,000 in 2024; more than USD 2,500 in 2025; and more than USD 600 in calendar year 2026 and after.
Notice 2024-85 also announces for calendar year 2024, that 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.
TPSOs that have performed backup withholding for a payee during calendar year 2024 must file a Form 945 and a Form 1099-K with the IRS and furnish a copy to the payee.
For calendar year 2025 and after, the IRS will assert penalties under section 6651 or 6656 for a TPSO’s failure to withhold and pay backup withholding tax.
