The 1099-K Threshold Reverted to $20,000. If You Settle Card Payments, It Never Applied to You.

Somewhere in your support queue this winter there will be a merchant who read that the Form 1099-K threshold went back up to $20,000 and wants to know why they still got one. The threshold they read about has never applied to card payments — and it is only one of three things that are different about the 1099-Ks filed in early 2027 from the process most teams last rebuilt years ago. Here is what the law and the IRS's own forms say as of September 2026, written for the acquirer or payment facilitator that settles the money.

What the Threshold Change Did, and Did Not, Touch

Section 70432 of the One, Big, Beautiful Bill Act, signed on 4 July 2025, rewrote the de minimis rule in section 6050W(e) of the Internal Revenue Code. A third party settlement organization — the IRS's term for a payment app or online marketplace that pays its sellers — now reports a payee only if gross payments to that payee exceed $20,000 and the number of transactions exceeds 200. Both conditions, not either. The amendment takes effect as if it had been part of the 2021 American Rescue Plan, so the $600 threshold that law enacted, and the phase-in the IRS had announced for 2024 and 2025, disappeared retroactively.

None of that reaches payment card transactions. Section 6050W(e) is headed "Exception for de minimis payments by third party settlement organizations" and applies only to them. The IRS's updated FAQs, released on 23 October 2025, say there is no threshold for payment card transactions and that a payee who received a single cent by card should receive a Form 1099-K for it. A merchant acquiring entity has no de minimis exception and never had one — card transactions have been reported this way for payments made after 31 December 2010.

The merchant asking why the $20,000 rule did not save them is asking about a rule for marketplaces. The answer is one sentence: the threshold applies to platforms that pay sellers, not to card acceptance.

Who Actually Files

The statute puts the obligation on the payment settlement entity, which for card transactions is the merchant acquiring entity: the bank or other organisation contractually obliged to pay the merchant. Where more than one party qualifies, the one that submits the instruction to transfer funds to the payee's account files the return. Two further rules follow, and both land on the payment facilitator model:

• If a PSE contracts with an electronic payment facilitator or other third party to make settlement payments on its behalf, the facilitator files instead of the PSE. It needs no agreement with the payee, and the money need not come from its own account — submitting the transfer instruction is enough. The form has a checkbox for this case.
• If you receive settlement from a PSE on behalf of your sub-merchants and distribute it to them, you are an aggregated payee: a participating payee with respect to the acquirer that paid you, and a PSE with respect to every sub-merchant you paid. The IRS's own example is a franchisor collecting for its franchisees, and it maps closely onto the payment facilitator model.

The parties can agree in writing that a different party files, but the designation does not relieve the responsible party of penalties if the designee fails. And the IRS is explicit that a PSE cannot charge merchants a fee for producing the form.

What Goes in the Boxes

Box 1a is the gross amount of reportable transactions for the calendar year, and the instructions define gross without mercy: no adjustment for credits, fees, refunds, shipping or anything else. This is the source of the February phone call. A merchant compares the form to what landed in their bank account, finds a larger number, and assumes an error. There is none. Fees and refunds are deductions on the merchant's return, not reductions to the figure you report.

The rest of the form is more operational than most teams realise. Box 1b is the card-not-present portion of box 1a, so entry mode has to survive to the filing file. Box 2 is the merchant category code; a payee with volume under several MCCs gets one form per MCC or a single form under the largest. Box 3 is the transaction count excluding refunds, boxes 5a through 5l split the gross by month, and a payee who received both card and third party network payments from you gets two separate forms.

New for Calendar Year 2026: Two Tip Boxes

The December 2026 revision of Form 1099-K — the one used to report calendar year 2026 amounts, filed from January 2027 — adds Box 1c for cash tips included in box 1a and Box 1d for up to two Treasury Tipped Occupation Codes. Both exist because section 70201 of the same Act created the deduction for qualified tips. Treasury and the IRS finalised the occupation list on 10 April 2026: more than 70 occupations in eight numbered families, each with a three-digit code, plus 000 for tips received in a non-qualifying occupation.

Read the statute before assuming this is your problem. The return-level requirement, new section 6050W(a)(3), applies "in the case of a third party settlement organization" to amounts payors have reasonably designated as cash tips. The payee-statement language in section 6050W(f)(2) is not written with that limitation, and the form instructions describe boxes 1c and 1d without distinguishing filer types at all. That is a real gap between the statute and the form, and we are not going to resolve it here: if you settle card payments to businesses, get counsel's reading now rather than in January. The IRS waived penalties for omitting tip and occupation detail for 2025, but that relief was limited to tax year 2025 by its own terms, and we have found no equivalent notice covering 2026.

The Filing System Is Changing Underneath You

This is the change most likely to bite a team that has filed the same way for a decade. The IRS is retiring the FIRE system. Its FIRE page now states that the last day to file through FIRE is 19 November 2026 at 3 p.m. Eastern, that current FIRE users must complete an IRIS Application for TCC to file tax year 2026 returns in the 2027 filing season, and that IRIS will be the only electronic filing system for information returns — current year, prior year or corrections — after 1 January 2027. New FIRE transmitter applications are no longer accepted.

Anyone filing ten or more information returns of any type in a year must file electronically, so for a payment facilitator this is not optional. If a vendor produces your 1099-Ks, get written confirmation that it is filing through IRIS for tax year 2026. If you transmit yourself, the IRIS TCC application gates everything after it, and the IRS's 2026 general instructions say a typical application takes 45 business days to process.

Where Onboarding Decides the Outcome

Every penalty on this form traces back to a name and TIN pair collected by your onboarding flow months before the tax team sees it. Three rules from the IRS general instructions belong in the application:

• A sole proprietor is reported under the individual's name on the first line, with the trade name on the second. A form filed under the DBA alone is wrong; the type of TIN to report follows the Form W-9 instructions.
• Collect a signed Form W-9 from U.S. merchants and an applicable Form W-8 from foreign ones. The offshore-payee exception depends on that documentation, and the W-8 must be collected within 90 days of entering into the contract.
• Run the pair through the IRS TIN Matching program before you file. The IRS's own instructions anticipate that filers who validate in advance receive fewer CP2100 notices, and a CP2100 is where the real cost starts.

That cost is backup withholding at 24 percent. If a merchant never furnishes a TIN, you withhold on reportable payments until they do. If the IRS notifies you that a filed name and TIN combination is incorrect, you send the payee a B notice and must withhold on any reportable payment made more than 30 business days after the notice, until a certified W-9 arrives. Withheld amounts go in box 4 and on Form 945, and a filer who fails to withhold as required can become liable for the uncollected amount itself.

Dates, Penalties, and Stale Guidance

Payee statements are due to merchants by 31 January of the following year; returns are due to the IRS by 28 February on paper or 31 March electronically. The failure-to-file penalty under section 6721 is tiered by how late the correct return arrives and adjusted annually. For returns due in 2026 the IRS's penalty page lists $60 per return if corrected within 30 days, $130 by 1 August, $340 after that and $680 for intentional disregard; the row for returns due in 2027 had not been published as of September 2026. An incorrect or missing TIN counts as a failure.

Check the date on whatever you are reading, including IRS material. The 2025 edition of the General Instructions for Certain Information Returns is still online at its old address and opens its Form 1099-K note with the $2,500 and $600 phase-in the Act erased; the IRS has since re-issued the general instructions for 2026 as Publication 1099, which carries the current rule. Any source describing a phase-in, or any threshold at all for card transactions, predates the current law.

What to Do Before Year End

1. Confirm which entity in your stack submits the settlement instruction for each merchant population, and therefore who files.
2. Apply for an IRIS transmitter control code now if you transmit yourself, or get written IRIS confirmation from your filing vendor.
3. Check that settlement data carries entry mode, MCC and refund flags through to the reporting file.
4. Run the full merchant file through TIN Matching before the December cut-off, and clear mismatches while merchants are still answering the phone.
5. Get counsel's position on boxes 1c and 1d for your filer type, and if you will populate them, work out where a card transaction's tip amount comes from in your data.
6. Rewrite the support macro: the 1099-K is gross, it includes refunded transactions, and the $20,000 threshold is for marketplaces, not card acceptance.

The One-Line Version

The threshold reverted for platforms that pay sellers; for anyone settling card payments there was never a threshold to revert. What did change for the returns filed in early 2027 is the form, which grew two tip boxes, and the pipe, which is IRIS or nothing after 1 January 2027. The number on the form has been the same job since 2011. The way you deliver it is not.