IRS Prop. Reg: Notice of Proposed Rulemaking on Third-Party Network Backup Withholding

The IRS has issued a notice of proposed rulemaking on backup withholding for third-party network transactions. The proposed regulations reflect recent changes to the statutory law targeting third-party settlement organizations (TPSOs) involved in payment processing. These changes, stemming from the One Big Beautiful Bill Act (OBBBA), revert the reporting threshold for TPSOs to pre-2021 levels, requiring reporting only when payments exceed $20,000 and involve over 200 transactions in a calendar year. [REG 112829 25; RIN 1545-BR80, 26 CFR Part 31 (Jan. 8, 2026)]