Form 1099-K FAQs: Should my organization be preparing, filing and furnishing Form 1099-K?

A1. Characteristics of a third party payment network include:

• The existence of a central organization with whom a substantial number of providers of goods or services (who are unrelated to the central organization) have established accounts;
• An agreement between the central organization and the providers of goods or services to settle transactions between the providers and purchasers;
• An agreement for standards and mechanisms for settling such transactions; and
• The guarantee of payment in settlement of such transactions.

An example of a TPSO is an online auction payment facilitator like an online marketplace, which operates as an intermediary between buyer and seller by transferring funds from the buyer to the seller for the provision of goods or services and otherwise meets the characteristics described in the bullet points above.

Under the reporting requirements, these TPSOs must report the gross amount of the reportable payment transactions of the participating payee to which they make payments provided the gross amount of reportable payment transactions of the payee is more than $20,000 and for more than 200 transactions.

A2. No. An automated clearing house processes electronic payments between buyers and sellers through wire transfers, electronic checks, and direct deposits. Further, there is no contractual relationship between the automated-clearing house and payees. Thus, an automated clearing house does not qualify as a TPSO and payments made through its network are not reportable under IRC 6050W.

A3. Health carriers operating a healthcare network likely do not fit the definition of a TPSO because they do not operate a third party payment network that enables purchasers to transfer funds to providers of goods or services. Rather, health carriers generally accept payment, in the form of premiums, from buyers (employers or persons covered under the carrier’s plan) to give those buyers access to a network of healthcare providers; separately, health carriers then pay compensation to the medical professionals within their networks pursuant to predetermined rates. Accordingly, health carriers operating a healthcare network likely are not a third party settlement organization.

A4. No. In-house accounts payable departments do not fit the definition of a TPSO because they are internal processors of payments. They are not a third party.