Treasury and IRS issue final regulations on backup withholding on third party network transactions

Modern office facade geometric window patternModern office facade geometric window pattern

Treasury and IRS issue final regulations on backup withholding on third party network transactions

August 11, 2026

United States
United States
United States
The Department of the Treasury and Internal Revenue Service have issued final regulations (TD 10053) that revise the threshold for backup withholding on payments made by third party settlement organizations in settlement of third-party network transactions to align the threshold with the de minimis reporting threshold under section 6050W(e). The final regulations adopt, without change, the proposed regulations that were published on January 9, 2026.

As discussed more fully in our prior alert, the One Big Beautiful Bill Act (OBBBA) amended section 3406 to align the backup withholding provisions applicable to third party network transactions with the de minims exemption under section 6050W(e) (i.e., no Form 1099-K reporting required with respect to a third party network transaction if payments to a payee do not exceed $20,000 and 200 transactions in a calendar year). Specifically, a payment made pursuant to a third party network transaction would be treated as a reportable payment for purposes of section 3406 only if the payments to the payee exceed $20,000 and 200 transactions in a calendar year. Consistent with the proposed regulations, the final regulations revise the regulations under section 3406 to be in conformity with the OBBBA amendment. 

The final regulations apply with respect to payments made in calendar years beginning after December 31, 2024.

__________

If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.

The materials on the Eversheds Sutherland website are for general information purposes only and do not constitute legal advice. While reasonable care is taken to ensure accuracy, the materials may not reflect the most current legal developments. Eversheds Sutherland disclaims liability for actions taken based on the materials. Always consult a qualified lawyer for specific legal matters. To view the full disclaimer, see our Terms and Conditions or Disclaimer section in the footer. Eversheds Sutherland is a provider of legal and other services operating through various separate and distinct legal entities. For further information about these entities and Eversheds Sutherlands' structure please see the Legal Notice page of this website.

Services

Key contacts

marymonahan@eversheds-sutherland1

Mary E. Monahan

Partner

Washington, DC, United States

briantschosik@eversheds-sutherland.com

Brian Tschosik

Partner

Washington, DC, United States

jericabanks@eversheds-sutherland.com

Jerica Banks

Associate

Atlanta, United States

Latest Insights

Latest News

Latest Events

Geothermal Power Plant

podcasts and webcasts

October 12, 2026

Energy Transition Series - Energy Transition and Pricing Volatility

tree courtyard modern building architecture urban greenery design

legal updates

October 08, 2026

CFTC issues staff advisory on “mention market” event contracts

Building Image

legal updates

October 08, 2026

The Commercial Payments Bill: Practical Implications for Commercial Contrac...

Looking up skyscrapers modern city architecture

legal updates

October 08, 2026

SEC proposes to modernize performance fee rules and expand accredited inves...

© 2026 Eversheds Sutherland (US) LLP

Eversheds Sutherland is the name and brand under which the members of Eversheds Sutherland Limited (Eversheds Sutherland (International) LLP and Eversheds Sutherland (US) LLP) and their respective controlled, managed or affiliated firms and the members of Eversheds Sutherland (Europe) Limited and Eversheds Sutherland (Africa) Limited (each an "Eversheds Sutherland Entity" and together the "Eversheds Sutherland Entities") provide legal or other services to clients around the world. Eversheds Sutherland Entities are constituted and regulated in accordance with relevant local regulatory and legal requirements. The use of the name Eversheds Sutherland, is for description purposes only and does not imply that the member firms or their controlled, managed or affiliated entities are in a partnership or are part of a global entity. The responsibility for the provision of services to the client is defined in the terms of engagement between the instructed firm and the client. For information on Konexo please also see the Legal Notices page of this website
ATTORNEY ADVERTISING - Prior results do not guarantee a similar outcome.
Unless otherwise indicated, attorneys at Eversheds Sutherland (US) LLP are not certified by the Texas Board of Legal Specialization.