We wanted to update you on the provisions of the new tax bill that was signed into law on July 4 (the One Big Beautiful Bill Act). We recommend reviewing your current tax strategy in light of these changes. We are available to discuss how these provisions may impact your personal or business tax situation, and help you plan accordingly. If you have any questions or concerns, please call our office at (508) 830-0007.
Third-party network transaction reporting threshold: The bill reverts to the prior rule for Form 1099-K reporting, under which a third-party settlement organization is not required to report, unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200. The threshold had been phasing down and was scheduled to be $600 starting next year.
Form 1099 reporting threshold: The bill increases the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
Firearms transfer tax: The bill reduces the Sec. 5811 transfer tax on certain firearms.
Farmland sales: The bill adds a new Sec. 1062 that allows income tax resulting from the sale of farmland to a qualified farmer to be paid in four annual installments. This is a new provision.
Litigation financing: The bill as originally considered would have imposed a 31.8% tax on “qualified litigation proceeds” received by a “covered party,” as defined in the bill. That provision was dropped from the final bill.
Remittance transfer tax: The bill imposes a 1% tax on “remittance transfers,” imposed on the sender. A remittance transfer for these purposes is a transfer of cash, a money order, a cashier’s check, or similar physical instrument. It does not include funds withdrawn from an account held with a financial institution or charged to a credit or debit card.
Under Section 919(g) of the Electronic Fund Transfer Act, a remittance transfer is an electronic transfer of funds requested by a sender to a designated recipient that is initiated by a remittance transfer provider. A remittance transfer provider is any person or financial institution that provides remittance transfers for consumers in the normal course of its business, whether or not the consumer holds an account with the financial institution.
Employee retention credit enforcement: The bill requires employee retention credit (ERC) promoters to comply with due diligence requirements with respect to a taxpayer’s eligibility for (or the amount of) an ERC. The bill applies a $1,000 penalty for each failure to comply. It also extends the penalty for excessive refund claims to employment tax refund claims. It also prevents the IRS from issuing any additional unpaid claims under Sec. 3134, unless a claim for a credit or refund was filed on or before Jan. 31, 2024.
SSN requirements: The bill imposes an SSN requirement for claiming an American opportunity or lifetime learning credit under Sec. 25A.
EITC program: The Senate Finance Committee version of the bill proposed creating an earned income tax credit (EITC) certification program to allow the IRS to detect and manage duplicative EITC claims. That proposal was dropped from the bill.
Penalties for unauthorized disclosure of taxpayer information: A proposal in the Senate Finance Committee version of the bill to increase the Sec. 7213 penalties for unauthorized disclosure of taxpayer information was also removed.