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Compliance Update - March, 2021

IRS Lowers 1099-K Thresholds for TY2021

Payment Settlement Entities should prepare for major changes to Form 1099-K Payment Card and Third Party Network Transactions Reporting.

Under the new American Rescue Act, if a digital platform participant receives $600 or more in aggregate payments through third-party network transactions, the digital platform - referred to as a third-party settlement organization in the statute - is required to file an information return reporting the payments.

Effective Tax Year 2021, this reporting change impacts gig workers operating via digital platforms including:

  • Ride share services (e.g., Uber, Lyft ...)
  • Food delivery services (e.g., DoorDash, Postmates ...)
  • Lodging services (e.g., Airbnb, VRBO ...)
  • Online marketplaces (e.g., Amazon, Ebay, Etsy, Paypal ...)
Reporting Requirements
  • Provide payee copies by January 31.
  • IRS file by March 31.
  • 27 states participate in the IRS Combined Federal/State Filing Program (CF/SF).
    • 17 of these states have CF/SF exceptions where certain scenarios need to be reported directly to the state, even though they participate in CF/SF.
  • 14 states require state direct reporting.
    • 1099 Pro Enterprise and Corporate Suite software generate state direct files per IRS Pub. 1220 specifications.
  • The remaining states/territories do not have 1099-K reporting obligations at this time.
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