IRS clamps backup tax bite on your Venmo and gig payouts
Published Date: 8/10/2026
Rule
Summary
This document contains final regulations governing backup withholding on reportable payments with respect to third party network transactions. The final regulations reflect recent changes to the statutory law that affect the backup withholding requirements for third party settlement organizations who make payments in settlement of third party network transactions.
Analyzed Economic Effects
4 provisions identified: 2 benefits, 1 costs, 1 mixed.
Backup withholding tied to TPSO de minimis
If you receive payments through a third party settlement organization (TPSO), backup withholding for those third party network transactions applies only once, during a calendar year, the participating payee exceeds both the de minimis TPSO thresholds in section 6050W: 200 transactions and $20,000 in gross payments. When those thresholds are exceeded, the payor must withhold on the entire transaction that causes the exceedance and on any later transactions during that calendar year.
Prior-year reportable payments trigger next-year withholding
If a payor made one or more reportable payments in settlement of third party network transactions to a participating payee during the preceding calendar year, the payor must backup withhold on payments to that participating payee during the current calendar year regardless of whether the current-year payments exceed the de minimis thresholds.
When rule takes effect for payments
The regulations are effective August 10, 2026, and apply with respect to payments made in calendar years beginning after December 31, 2024 (i.e., they govern payments made in calendar year 2025 and later).
Less frequent withholding eases small-entity burden
The Treasury and IRS certified these final regulations will not have a significant economic impact on a substantial number of small entities, noting that because the backup withholding threshold for third party network transactions increases, entities will generally have to backup withhold less often.
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Key Dates
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