S. 1425 — Red Tape Reduction Act of 2025

This section reinstates a de minimis exception under IRC §6050W(e) for third party settlement organizations' reporting of third party network transactions (e.g., payments processed via apps such as PayPal or Venmo), requiring a Form 1099-K only if the aggregate amount exceeds $10,000 or the number of transactions exceeds 50, for transactions settled after December 31, 2024. (As background, the American Rescue Plan Act of 2021 eliminated this exception, requiring reporting for any aggregate amount exceeding $600 regardless of transaction count, though implementation has been delayed.)

This section provides that payments in settlement of third-party network transactions are treated as reportable payments for backup withholding only if the participating payee's aggregate transactions for the calendar year exceed both the number threshold specified in section 6050W(e)(2) and the dollar amount threshold specified in section 6050W(e)(1), unless such payments were reportable in the prior calendar year. (Thus, backup withholding generally applies only to payees meeting Form 1099-K reporting thresholds.) The amendments apply to calendar years beginning after December 31, 2024.