The American Rescue Plan Act of 2021 indeed brought significant changes to reporting requirements, particularly concerning Form 1099-K, which is utilized to report Payment Card and Third-Party Network Transactions. These transactions encompass various types of payments made to merchants or individuals through credit card networks or third-party payment processors. The lowered threshold mandated by the American Rescue Plan Act of 2021 means that more transactions are now subject to reporting on Form 1099-K.
Form 1099-K is typically used to report payments made via credit card transactions, debit card transactions, and other electronic payment methods facilitated by third-party payment processors such as PayPal, Stripe, Square, and others. These payments can include:
- From payment card transactions (e.g., debit, credit, or stored-value cards), and/or
- In settlement of third-party payment network transactions above the minimum reporting thresholds.
For returns for calendar years after 2021, payors must report gross payments that exceed $600 and any number of transactions. This is quite a step down from the prior requirement for payors to report gross payments that exceed $20,000 and more than 200 such transactions. Now, a third-party settlement organization must report any information concerning third party network transactions of any participating payee only if the gross amount of total reportable payment transactions exceeds $600 for the calendar year, regardless of the number of transactions.
Also, it is worth noting that the Form 1099-K (Rev. January 2022) is now a continuous use form.
Check out the Form 1099-K and Instructions, both revised in January 2022, here: