§6050W — Returns relating to payments made in settlement of payment card and third party network transactions
Statute Text — 26 U.S.C. §6050W
Each payment settlement entity shall make a return for each calendar year setting forth—
the name, address, and TIN of each participating payee to whom one or more payments in settlement of reportable payment transactions are made,
the gross amount of the reportable payment transactions with respect to each such participating payee and
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1 So in original. Probably should be preceded by a comma.
in the case of a third party settlement organization, the portion of reportable payment transactions that have been reasonably designated by payors as cash tips and the occupation described in section 224(d)(1) of the person receiving such tips.
Such return shall be made at such time and in such form and manner as the Secretary may require by regulations.
For purposes of this section—
The term “payment settlement entity” means—
in the case of a payment card transaction, the merchant acquiring entity, and
in the case of a third party network transaction, the third party settlement organization.
The term “merchant acquiring entity” means the bank or other organization which has the contractual obligation to make payment to participating payees in settlement of payment card transactions.
The term “third party settlement organization” means the central organization which has the contractual obligation to make payment to participating payees of third party network transactions.
For purposes of this section—
In any case where reportable payment transactions of more than one participating payee are settled through an intermediary—
such intermediary shall be treated as the participating payee for purposes of determining the reporting obligations of the payment settlement entity with respect to such transactions, and
such intermediary shall be treated as the payment settlement entity with respect to the settlement of such transactions with the participating payees.
In any case where an electronic payment facilitator or other third party makes payments in settlement of reportable payment transactions on behalf of the payment settlement entity, the return under subsection (a) shall be made by such electronic payment facilitator or other third party in lieu of the payment settlement entity.
For purposes of this section—
The term “reportable payment transaction” means any payment card transaction and any third party network transaction.
The term “payment card transaction” means any transaction in which a payment card is accepted as payment.
The term “third party network transaction” means any transaction described in subsection (d)(3)(A)(iii) which is settled through a third party payment network.
For purposes of this section—
The term “participating payee” means—
in the case of a payment card transaction, any person who accepts a payment card as payment, and
in the case of a third party network transaction, any person who accepts payment from a third party settlement organization in settlement of such transaction.
Except as provided by the Secretary in regulations or other guidance, such term shall not include any person with a foreign address. Notwithstanding the preceding sentence, a person with only a foreign address shall not be treated as a participating payee with respect to any payment settlement entity solely because such person receives payments from such payment settlement entity in dollars.
The term “person” includes any governmental unit (and any agency or instrumentality thereof).
The term “payment card” means any card which is issued pursuant to an agreement or arrangement which provides for—
one or more issuers of such cards,
a network of persons unrelated to each other, and to the issuer, who agree to accept such cards as payment, and
standards and mechanisms for settling the transactions between the merchant acquiring entities and the persons who agree to accept such cards as payment.
The acceptance as payment of any account number or other indicia associated with a payment card shall be treated for purposes of this section in the same manner as accepting such payment card as payment.
The term “third party payment network” means any agreement or arrangement—
which involves the establishment of accounts with a central organization by a substantial number of persons who—
are unrelated to such organization,
provide goods or services, and
have agreed to settle transactions for the provision of such goods or services pursuant to such agreement or arrangement,
which provides for standards and mechanisms for settling such transactions, and
which guarantees persons providing goods or services pursuant to such agreement or arrangement that such persons will be paid for providing such goods or services.
Such term shall not include any agreement or arrangement which provides for the issuance of payment cards.
A third party settlement organization shall be required to report any information under subsection (a) with respect to third party network transactions of any participating payee only if—
the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions exceeds $20,000, and
the aggregate number of such transactions exceeds 200.
Every person required to make a return under subsection (a) shall furnish to each person with respect to whom such a return is required a written statement showing—
the name, address, and phone number of the information contact of the person required to make such return, and
the gross amount of the reportable payment transactions (including a separate accounting of any such amounts that have been reasonably designated by payors as cash tips and the occupation described in section 224(d)(1) of the person receiving such tips) with respect to the person required to be shown on the return.
The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made. Such statement may be furnished electronically, and if so, the email address of the person required to make such return may be shown in lieu of the phone number.
The Secretary may prescribe such regulations or other guidance as may be necessary or appropriate to carry out this section, including rules to prevent the reporting of the same transaction more than once.
Treasury Regulations
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Treas. Reg. §1.6050W-1Information reporting for payments made in settlement of payment card and third party network transactions
(a) In general—(1) General rule. Every payment settlement entity, as defined in paragraph (a)(4) of this section, must file an information return for each calendar year with respect to payments made in settlement of reportable payment transactions, as defined in paragraph (a)(3) of this section, setting forth the following information:
(i) The name, address, and taxpayer identification number (TIN) of each participating payee, as defined in paragraph (a)(5) of this section, to whom one or more payments in settlement of reportable payment transactions are made.
(ii) With respect to each participating payee, the gross amount, as defined in paragraph (a)(6) of this section, of—
(A) The aggregate reportable payment transactions for the calendar year; and
(B) The aggregate reportable payment transactions for each month of the calendar year.
(iii) Any other information required by the form, instructions or current revenue procedures.
(2) Payments in settlement of reportable payment transactions. A payment settlement entity, as defined in paragraph (a)(4) of this section (or an electronic payment facilitator, as defined in paragraph (d)(2) of this section), makes a payment in settlement of a reportable payment transaction if the payment settlement entity (or electronic payment facilitator) submits the instruction to transfer funds to the account of the participating payee for purposes of settling the reportable payment transaction. In the case of a third party settlement organization that has the contractual obligation to make payments to participating payees, a payment in settlement of a reportable payment transaction includes the submission of instructions to a purchaser to transfer funds directly to the account of the participating payee for purposes of settling the reportable payment transaction.
(3) Reportable payment transaction. The term reportable payment transaction means any payment card transaction (as defined in paragraph (b)(1) of this section) and any third party network transaction (as defined in paragraph (c)(1) of this section).
(4) Payment settlement entity—(i) Definition. The term payment settlement entity means a domestic or foreign entity that is—
(A) In the case of a payment card transaction, a merchant acquiring entity (as defined in paragraph (b)(2) of this section); and
(B) In the case of a third party network transaction, a third party settlement organization (as defined in paragraph (c)(2) of this section).
(ii) Multiple payment settlement entities. If two or more persons qualify as payment settlement entities (as defined in paragraph (a)(4)(i) of this section) with respect to a reportable payment transaction, then only the payment settlement entity that in fact makes payment in settlement of the reportable payment transaction must file the information return required by paragraph (a)(1) of this section.
(5) Participating payee—(i) Definition. In general, the term participating payee means any person, including any governmental unit (and any agency or instrumentality thereof), who:
(A) In the case of a payment card transaction, accepts a payment card (as defined in paragraph (b)(3) of this section) as payment; and
(B) In the case of a third party network transaction, accepts payment from a third party settlement organization (as defined in paragraph (c)(2) of this section) in settlement of such transaction.
(ii) Foreign payees—(A) In general. For payments pursuant to contractual obligations entered into after December 31, 2010, a payment settlement entity that is a person described as a U.S. payor or U.S. middleman in § 1.6049-5(c)(5) is not required to make a return of information for payments to a participating payee with a foreign address as long as, prior to payment, the payment settlement entity has in its files documentation upon which the payment settlement entity may rely to treat the payment as made to a foreign person in accordance with § 1.1441-1(e)(1)(ii). For purposes of this paragraph (a)(5)(ii), the provisions of § 1.1441-1 shall apply by substituting the term payor for the term withholding agent and without regard to the limitation to amounts subject to withholding under chapter 3 of the Internal Revenue Code and the regulations under that chapter. Such a payment settlement entity need not make a return of information for payments made outside the United States (within the meaning of § 1.6049-5(e)) to an offshore account (as defined in § 1.6049-5(c)(1)) to a participating payee with only a foreign address if the name of the participating payee indicates that it is an entity listed as a per se corporation under § 301.7701-2(b)(8)(i) and the payment settlement entity does not know or have reason to know that the participating payee is a United States person. A payment settlement entity may apply the grace period rules of § 1.6049-5(d)(2)(ii) of the regulations for payments to a participating payee with only a foreign address, without regard to whether the amounts paid are described in § 1.1441-6(c)(2) or are reportable under section 6042, 6045, 6049, or 6050N. For payments pursuant to contractual obligations entered into before January 1, 2011, a payment settlement entity that is a person described as a U.S. payor or U.S. middleman in § 1.6049-5(c)(5) is not required to make a return of information for payments to a participating payee with a foreign address as long as the payment settlement entity neither knows nor has reason to know that the participating payee is a United States person. For this purpose, a renewal of such a contractual obligation will not result in a new contractual obligation unless there is a material modification to the contractual obligation.
(B) Non-U.S. payor or middleman. A payment settlement entity that is not a person described as a U.S. payor or U.S middleman in § 1.6049-5(c)(5) is not required to make a return of information for a payment to a participating payee that does not have a United States address as long as the payment settlement entity neither knows nor has reason to know that the participating payee is a United States person. If the participating payee has any United States address, the payment settlement entity may treat the participating payee as a foreign person only if the payment settlement entity has in its files documentation upon which the payment settlement entity may rely to treat the payment as made to a foreign person in accordance with § 1.1441-1(e)(1)(ii).
(C) Foreign address; United States address. For purposes of this section, foreign address means any address that is not within the United States, as defined in section 7701(a)(9) of the Internal Revenue Code (the States and the District of Columbia). United States address means any address that is within the United States.
(6) Gross amount. For purposes of this section, gross amount means the total dollar amount of aggregate reportable payment transactions for each participating payee without regard to any adjustments for credits, cash equivalents, discount amounts, fees, refunded amounts or any other amounts. The dollar amount of each transaction is determined on the date of the transaction.
(b) Payment card transactions—(1) Definition. The term payment card transaction means any transaction in which a payment card, or any account number or other indicia associated with a payment card, is accepted as payment.
(2) Merchant acquiring entity. The term merchant acquiring entity means the bank or other organization that has the contractual obligation to make payment to participating payees (as defined in paragraph (a)(5)(i)(A) of this section) in settlement of payment card transactions.
(3) Payment card—(i) The term payment card means any card, including any stored-value card as defined in paragraph (b)(4) of this section, issued pursuant to an agreement or arrangement that provides for—
(A) One or more issuers of such cards;
(B) A network of persons unrelated to each other, and to the issuer, who agree to accept such cards as payment; and
(C) Standards and mechanisms for settling the transactions between the merchant acquiring entities and the persons who agree to accept the cards as payment.
(ii) Persons who agree to accept such cards as payment as described in this paragraph (b)(3) are participating payees within the meaning of paragraph (a)(5)(i)(A) of this section.
(4) Stored-value cards. The term stored-value card means any card with a prepaid value, including any gift card.
(5) Transactions for which no return of information is required under section 6050W—(i) Withdrawals and cash advances. The use of a “payment card” as defined in paragraph (b)(3) of this section by a cardholder to withdraw funds at an automated teller machine, or to obtain a cash advance or loan against the cardholder's account, is not a payment card transaction under paragraph (b)(1) of this section because the card is not being accepted as payment by a merchant or other payee.
(ii) Convenience checks. The acceptance of a check issued in connection with a payment card account by a merchant or other payee is not a payment card transaction under paragraph (b)(1) of this section because the check is accepted and processed through the banking system in the same manner as a traditional check, not as a payment card.
(iii) Payee related to issuer. No return of information is required under this section for any transaction in which a payment card within the meaning of paragraph (b)(3) is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
(c) Third party network transactions—(1) Definition. The term third party network transaction means any transaction that is settled through a third party payment network.
(2) Third party settlement organization. The term third party settlement organization means the central organization that has the contractual obligation to make payments to participating payees (as defined in paragraph (a)(5)(i)(B) of this section) of third party network transactions. A central organization is a third party settlement organization if it provides a third party payment network (as defined in paragraph (c)(3)(i) of this section) that enables purchasers to transfer funds to providers of goods and services.
(3) Third party payment network. (i) The term third party payment network means any agreement or arrangement that—
(A) Involves the establishment of accounts with a central organization by a substantial number of providers of goods or services who are unrelated to the organization and who have agreed to settle transactions for the provision of the goods or services to purchasers according to the terms of the agreement or arrangement;
(B) Provides standards and mechanisms for settling the transactions; and
(C) Guarantees payment to the persons providing goods or services in settlement of transactions with purchasers pursuant to the agreement or arrangement.
(ii) A third party payment network does not include any agreement or arrangement that provides for the issuance of payment cards.
(iii) Persons who are providers of goods and services as described in this paragraph (c)(3) are participating payees within the meaning of paragraph (a)(5)(i)(B) of this section.
(4) Exception for de minimis payments. A third party settlement organization is required to report any information under paragraph (a)(1) of this section with respect to third party network transactions of any participating payee only if—
(i) The amount that would otherwise be reported under paragraph (a)(1)(ii) of this section with respect to such transactions exceeds $20,000; and
(ii) The aggregate number of such transactions exceeds 200.
(5) Coordination with information returns required under section 6045 of the Code—(i) Reporting on exchanges involving digital assets. Notwithstanding the provisions of this paragraph (c), the reporting of a payment made in settlement of a third party network transaction in which the payment by a payor is made using digital assets as defined in § 1.6045-1(a)(19) or the goods or services provided by a payee are digital assets must be as follows:
(A) Reporting on payors with respect to payments made using digital assets. If a payor makes a payment using digital assets and the exchange of the payor's digital assets for goods or services is a sale of digital assets by the payor under § 1.6045-1(a)(9)(ii), the amount paid to the payor in settlement of that exchange is subject to the rules as described in § 1.6045-1 (including any exemption from reporting under § 1.6045-1) and not this section.
(B) Reporting on payees with respect to the sale of goods or services that are digital assets. If the goods or services provided by a payee in an exchange are digital assets, the exchange is a sale of digital assets by the payee under § 1.6045-1(a)(9)(ii), and the payor is a broker under § 1.6045-1(a)(1) that effected the sale of such digital assets, the amount paid to the payee in settlement of that exchange is subject to the rules as described in § 1.6045-1 (including any exemption from reporting under § 1.6045-1) and not this section.
(ii) Examples. The following examples illustrate the rules of this paragraph (c)(5).
(A) Example 1—(1) Facts. CRX is a shared-service organization that performs accounts payable services for numerous purchasers that are unrelated to CRX. A substantial number of sellers of goods and services, including Seller S, have established accounts with CRX and have agreed to accept payment from CRX in settlement of their transactions with purchasers. The agreement between sellers and CRX includes standards and mechanisms for settling the transactions and guarantees payment to the sellers, and the arrangement enables purchasers to transfer funds to providers. Pursuant to this seller agreement, CRX accepts cash from purchasers as payment as well as digital assets, which it exchanges into cash for payment to sellers. Additionally, CRX is a processor of digital asset payments as defined in § 1.6045-1(a)(22) and a broker under § 1.6045-1(a)(1). P, an individual not otherwise exempt from reporting, purchases one month of services from S through CRX's organization. S is also an individual not otherwise exempt from reporting. S's services are not digital assets under § 1.6045-1(a)(19). To effect this transaction, P transfers 100 units of DE, a digital asset as defined in § 1.6045-1(a)(19), to CRX. CRX, in turn, exchanges the 100 units of DE for $1,000, based on the fair market value of the DE units, and pays $1,000 to S.
(2) Analysis with respect to CRX's status. CRX's arrangement constitutes a third party payment network under paragraph (c)(3) of this section because a substantial number of persons that are unrelated to CRX, including S, have established accounts with CRX, and CRX is contractually obligated to settle transactions for the provision of goods or services by these persons to purchasers, including P. Thus, under paragraph (c)(2) of this section, CRX is a third party settlement organization and the transaction involving P's purchase of S's services using 100 units of digital asset DE is a third party network transaction under paragraph (c)(1) of this section.
(3) Analysis with respect to the reporting on P. P's payment of 100 units of DE to CRX in return for the payment by CRX of $1,000 in cash to S is a sale of the DE units as defined in § 1.6045-1(a)(9)(ii)(D) that is effected by CRX, a processor of digital asset payments and broker under § 1.6045-1(a)(1). Accordingly, pursuant to the rules under paragraph (c)(5)(i)(A) of this section, CRX must file an information return under § 1.6045-1 with respect to P's sale of the DE units and is not required to file an information return under paragraph (a)(1) of this section with respect to P.
(4) Analysis with respect to the reporting on S. S's services are not digital assets as defined in § 1.6045-1(a)(19). Accordingly, pursuant to the rules under paragraph (c)(5)(i)(B) of this section, CRX's payment of $1,000 to S in settlement of the reportable payment transaction is subject to the reporting rules under paragraph (a)(1) of this section and not the reporting rules as described in § 1.6045-1.
(B) Example 2—(1) Facts. CRX is an entity that owns and operates a digital asset trading platform and provides digital asset custodial services and digital asset broker services under § 1.6045-1(a)(1). CRX also exchanges on behalf of customers digital assets under § 1.6045-1(a)(19), including nonfungible tokens, referred to as NFTs, representing ownership in unique digital artwork, video, or music. Exchange transactions undertaken by CRX on behalf of its customers are considered sales under § 1.6045-1(a)(9)(ii) that are effected by CRX and subject to reporting by CRX under § 1.6045-1. A substantial number of NFT sellers have accounts with CRX, into which their NFTs are deposited for sale. None of these sellers are related to CRX, and all have agreed to settle transactions for the sale of their NFTs in digital asset DE, or other forms of consideration, and according to the terms of their contracts with CRX. Buyers of NFTs also have accounts with CRX, into which digital assets are deposited for later use as consideration to acquire NFTs. Once a buyer decides to purchase an NFT for a price agreed to by the NFT seller, CRX effects the requested exchange of the buyer's consideration for the NFT, which allows CRX to guarantee delivery of the bargained for consideration to both buyer and seller. CRX charges a transaction fee on every NFT sale, which is paid by the buyer in additional units of digital asset DE. Seller J, an individual not otherwise exempt from reporting, sells NFTs representing digital artwork on CRX's digital asset trading platform. J does not perform any other services with respect to these transactions. Buyer B, also an individual not otherwise exempt from reporting, seeks to purchase J's NFT-4 using units of DE. Using CRX's platform, buyer B and seller J agree to exchange J's NFT-4 for B's 100 units of DE (with a value of $1,000). At the direction of J and B, CRX executes this exchange, with B paying CRX's transaction fee using additional units of DE.
(2) Analysis with respect to CRX's status. CRX's arrangement with J and the other NFT sellers constitutes a third party payment network under paragraph (c)(3) of this section because a substantial number of providers of goods or services who are unrelated to CRX, including J, have established accounts with CRX, and CRX is contractually obligated to settle transactions for the provision of goods or services, such as NFTs representing goods or services, by these persons to purchasers. Thus, under paragraph (c)(2) of this section, CRX is a third party settlement organization and the sale of J's NFT-4 for 100 units of DE is a third party network transaction under paragraph (c)(1) of this section. Therefore, CRX is a payment settlement entity under paragraph (a)(4)(i)(B) of this section.
(3) Analysis with respect to the reporting on B. The exchange of B's 100 units of DE for J's NFT-4 is a sale under § 1.6045-1(a)(9)(ii)(A)(2) by B of the 100 DE units that was effected by CRX. Accordingly, under paragraph (c)(5)(i)(A) of this section, the amount paid to B in settlement of the exchange is subject to the rules as described in § 1.6045-1, and CRX must file an information return under § 1.6045-1 with respect to B's sale of the 100 DE units. CRX is not required to also file an information return under paragraph (a)(1) of this section with respect to the amount paid to B even though CRX is a third party settlement organization.
(4) Analysis with respect to the reporting on J. The exchange of J's NFT-4 for 100 units of DE is a sale under § 1.6045-1(a)(9)(ii) by J of a digital asset under § 1.6045-1(a)(19) that was effected by CRX. Accordingly, under paragraph (c)(5)(i)(B) of this section, the amount paid to J in settlement of the exchange is subject to the rules as described in § 1.6045-1, and CRX must file an information return under § 1.6045-1 with respect to J's sale of the NFT-4. CRX is not required to also file an information return under paragraph (a)(1) of this section with respect to the amount paid to J even though CRX is a third party settlement organization.
(d) Special rules—(1) Aggregated payees. If a person receives payments from a payment settlement entity (as defined in paragraph (a)(4) of this section) on behalf of one or more participating payees and distributes such payments to one or more participating payees (as defined in paragraph (a)(5) of this section), the person is treated as:
(i) The participating payee with respect to the payment settlement entity; and
(ii) The payment settlement entity with respect to the participating payees to whom the person distributes payments.
(2) Electronic payment facilitator. If a payment settlement entity (as defined in paragraph (a)(4) of this section) contracts with an electronic payment facilitator or other third party to make payments in settlement of reportable payment transactions on behalf of the payment settlement entity, the facilitator must file the annual information return under this section in lieu of the payment settlement entity. The facilitator need not have any agreement or arrangement with the participating payee. Also, the payment need not come from the facilitator's account. The facilitator need only submit instructions to transfer funds to the account of the participating payee in settlement of the reportable payment transaction. The facilitator is liable for any applicable penalties for failure to comply with the information reporting requirements of section 6050W.
(3) Designations. The party with the obligation to file the annual information return under this section may designate by written agreement any other person to satisfy the requirements of this section. Thus, notwithstanding the rule in paragraph (d)(2) of this section imposing the obligation to file the annual information return on the electronic payment facilitator in lieu of the payment settlement entity, the payment settlement entity may file the information return by designation if the parties agree in writing. However, a designation does not relieve the party with the reporting obligation from liability for any reporting failures. The party with the obligation to file the annual information return under this section remains liable for any applicable penalties under sections 6721 and 6722 if the requirements of this section are not satisfied.
(4) Conversion into United States dollars of amounts paid in foreign currency. When a payment is made or received in a foreign currency, the U.S. dollar amount shall be determined by converting such foreign currency into U.S. dollars on the date of the transaction at the spot rate (as defined in § 1.988-1(d)(1)) or pursuant to a reasonable spot rate convention. For example, a payor may use a month-end spot rate or a monthly average spot rate. A spot rate convention must be used consistently with respect to all non-dollar amounts reported and from year to year. Such convention cannot be changed without the consent of the Commissioner or his or her delegate.
(5) Unrelated persons. For purposes of this section, unrelated means any person who is not related to another person within the meaning of section 267(b) (providing a list of relationships), including the application of section 267(c) and (e)(3) (providing rules relating to constructive ownership), and section 707(b)(1) (relationships with partnerships).
(e) Examples. The following examples illustrate the provisions of this section:
(f) Prescribed form. The return required by paragraph (a)(1) of this section must be made according to the forms and instructions published by the Internal Revenue Service.
(g) Time and place for filing. Returns made under this section for any calendar year must be filed on or before February 28th (March 31st if filing electronically) of the following year at the Internal Revenue Service Center location designated in the instructions to the relevant form.
(h) Time and place for furnishing statement—(1) In general. Every payment settlement entity required to file a return under this section must also furnish to each participating payee a written statement with the same information (as described in paragraph (h)(2) of this section). The statement must be furnished to the payee on or before January 31st of the year following the calendar year in which the reportable payment is made. If the return of information is not made on magnetic media, this requirement may be satisfied by furnishing to such person a copy of all Forms 1099-K, “Merchant card and third-party payments,” or any successor form with respect to such person filed with the Internal Revenue Service Center. The statement will be considered furnished to the payee if it is mailed to the payee's last known address. The payment settlement entity may furnish the statement electronically in accordance with the rules provided in § 1.6050W-2.
(2) Information to be shown on statement furnished to payee. Each written statement furnished under paragraph (h)(1) of this section must include the following information—
(i) The name, address, and phone number (or email address if the statement is furnished electronically) of the information contact of the payment settlement entity.
(ii) With respect to the participating payee, the gross amount of—
(A) The aggregate reportable payment transactions for the calendar year; and
(B) The aggregate reportable payment transactions for each month of the calendar year.
(iii) Any other information required by the form, instructions, or current revenue procedures.
(i) Cross-reference to penalties. For provisions relating to the penalty for failure to file timely a correct information return required under section 6050W, see section 6721 and the associated regulations. For provisions relating to the penalty for failure to furnish timely a correct payee statement required under section 6050W(f), see section 6722 and the associated regulations. See section 6724 and the associated regulations for the waiver of a penalty if failure is due to reasonable cause and is not due to willful neglect.
(j) Applicability date. Except with respect to payments made using digital assets, the rules in this section apply to returns for calendar years beginning after December 31, 2010. For payments made using digital assets, this section applies on or after January 1, 2025.
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Treas. Reg. §1.6050W-1(a)In general—(1) General rule.
In general—(1) General rule. Every payment settlement entity, as defined in paragraph (a)(4) of this section, must file an information return for each calendar year with respect to payments made in settlement of reportable payment transactions, as defined in paragraph (a)(3) of this section, setting forth the following information:
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Treas. Reg. §1.6050W-1(b)Payment card transactions—(1) Definition.
Payment card transactions—(1) Definition. The term payment card transaction means any transaction in which a payment card, or any account number or other indicia associated with a payment card, is accepted as payment.
(2) Merchant acquiring entity. The term merchant acquiring entity means the bank or other organization that has the contractual obligation to make payment to participating payees (as defined in paragraph (a)(5)(i)(A) of this section) in settlement of payment card transactions.
(3) Payment card—(i) The term payment card means any card, including any stored-value card as defined in paragraph (b)(4) of this section, issued pursuant to an agreement or arrangement that provides for—
(A) One or more issuers of such cards;
(B) A network of persons unrelated to each other, and to the issuer, who agree to accept such cards as payment; and
(C) Standards and mechanisms for settling the transactions between the merchant acquiring entities and the persons who agree to accept the cards as payment.
(ii) Persons who agree to accept such cards as payment as described in this paragraph (b)(3) are participating payees within the meaning of paragraph (a)(5)(i)(A) of this section.
(4) Stored-value cards. The term stored-value card means any card with a prepaid value, including any gift card.
(5) Transactions for which no return of information is required under section 6050W—(i) Withdrawals and cash advances. The use of a “payment card” as defined in paragraph (b)(3) of this section by a cardholder to withdraw funds at an automated teller machine, or to obtain a cash advance or loan against the cardholder's account, is not a payment card transaction under paragraph (b)(1) of this section because the card is not being accepted as payment by a merchant or other payee.
(ii) Convenience checks. The acceptance of a check issued in connection with a payment card account by a merchant or other payee is not a payment card transaction under paragraph (b)(1) of this section because the check is accepted and processed through the banking system in the same manner as a traditional check, not as a payment card.
(iii) Payee related to issuer. No return of information is required under this section for any transaction in which a payment card within the meaning of paragraph (b)(3) is accepted as payment by a merchant or other payee who is related to the issuer of the payment card.
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Treas. Reg. §1.6050W-1(c)Third party network transactions—(1) Definition.
Third party network transactions—(1) Definition. The term third party network transaction means any transaction that is settled through a third party payment network.
(2) Third party settlement organization. The term third party settlement organization means the central organization that has the contractual obligation to make payments to participating payees (as defined in paragraph (a)(5)(i)(B) of this section) of third party network transactions. A central organization is a third party settlement organization if it provides a third party payment network (as defined in paragraph (c)(3)(i) of this section) that enables purchasers to transfer funds to providers of goods and services.
(3) Third party payment network. (i) The term third party payment network means any agreement or arrangement that—
(A) Involves the establishment of accounts with a central organization by a substantial number of providers of goods or services who are unrelated to the organization and who have agreed to settle transactions for the provision of the goods or services to purchasers according to the terms of the agreement or arrangement;
(B) Provides standards and mechanisms for settling the transactions; and
(C) Guarantees payment to the persons providing goods or services in settlement of transactions with purchasers pursuant to the agreement or arrangement.
(ii) A third party payment network does not include any agreement or arrangement that provides for the issuance of payment cards.
(iii) Persons who are providers of goods and services as described in this paragraph (c)(3) are participating payees within the meaning of paragraph (a)(5)(i)(B) of this section.
(4) Exception for de minimis payments. A third party settlement organization is required to report any information under paragraph (a)(1) of this section with respect to third party network transactions of any participating payee only if—
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Treas. Reg. §1.6050W-1(d)Special rules—(1) Aggregated payees.
Special rules—(1) Aggregated payees. If a person receives payments from a payment settlement entity (as defined in paragraph (a)(4) of this section) on behalf of one or more participating payees and distributes such payments to one or more participating payees (as defined in paragraph (a)(5) of this section), the person is treated as:
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Treas. Reg. §1.6050W-1(e)Examples.
Examples. The following examples illustrate the provisions of this section:
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Treas. Reg. §1.6050W-1(f)Prescribed form.
Prescribed form. The return required by paragraph (a)(1) of this section must be made according to the forms and instructions published by the Internal Revenue Service.
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Treas. Reg. §1.6050W-1(g)Time and place for filing.
Time and place for filing. Returns made under this section for any calendar year must be filed on or before February 28th (March 31st if filing electronically) of the following year at the Internal Revenue Service Center location designated in the instructions to the relevant form.
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Treas. Reg. §1.6050W-1(h)Time and place for furnishing statement—(1) In general.
Time and place for furnishing statement—(1) In general. Every payment settlement entity required to file a return under this section must also furnish to each participating payee a written statement with the same information (as described in paragraph (h)(2) of this section). The statement must be furnished to the payee on or before January 31st of the year following the calendar year in which the reportable payment is made. If the return of information is not made on magnetic media, this requirement may be satisfied by furnishing to such person a copy of all Forms 1099-K, “Merchant card and third-party payments,” or any successor form with respect to such person filed with the Internal Revenue Service Center. The statement will be considered furnished to the payee if it is mailed to the payee's last known address. The payment settlement entity may furnish the statement electronically in accordance with the rules provided in § 1.6050W-2.
(2) Information to be shown on statement furnished to payee. Each written statement furnished under paragraph (h)(1) of this section must include the following information—
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Treas. Reg. §1.6050W-1(i)Cross-reference to penalties.
Cross-reference to penalties. For provisions relating to the penalty for failure to file timely a correct information return required under section 6050W, see section 6721 and the associated regulations. For provisions relating to the penalty for failure to furnish timely a correct payee statement required under section 6050W(f), see section 6722 and the associated regulations. See section 6724 and the associated regulations for the waiver of a penalty if failure is due to reasonable cause and is not due to willful neglect.
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Treas. Reg. §1.6050W-1(j)Applicability date.
Applicability date. Except with respect to payments made using digital assets, the rules in this section apply to returns for calendar years beginning after December 31, 2010. For payments made using digital assets, this section applies on or after January 1, 2025.
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Treas. Reg. §1.6050W-2Electronic furnishing of information statements for payments made in settlement of payment card and third party network transactions
(a) Electronic furnishing of statements—(1) In general. A person required by section 6050W to furnish a written statement (furnisher) regarding payments made in settlement of payment card and third party network transactions to the person to whom it is required to be furnished (recipient) may furnish the statement in an electronic format in lieu of a paper format. A furnisher who meets the requirements of paragraphs (a)(2) through (a)(5) of this section is treated as furnishing the required statement.
(2) Consent—(i) In general. The recipient must have affirmatively consented to receive the statement required under section 6050W in an electronic format or, in the alternative, have previously consented to receive other federal tax statements in an electronic format from the furnisher. The consent may be made electronically in any manner that reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished to the recipient. Alternatively, the consent may be made in a paper document if it is confirmed electronically. Consents must be kept at all times available for inspection by the Internal Revenue Service. Recipients currently receiving electronic communications from the furnisher may elect to receive the statement required under section 6050W in a paper document in lieu of an electronic format. The election to receive a paper document may be made by notifying the furnisher electronically or in a paper document.
(ii) Withdrawal of consent. The consent requirement of paragraph (a)(2)(i) of this section is not satisfied if the recipient withdraws the consent to receive electronic statements and the withdrawal takes effect before the statement is furnished. The furnisher may provide that a withdrawal of consent takes effect either on the date it is received by the furnisher or on a subsequent date. The furnisher may also provide that a request for a paper statement will be treated as a withdrawal of consent.
(iii) Change in hardware or software requirements. If a change in the hardware or software required to access the statement creates a material risk that the recipient will not be able to access the statement, the furnisher must, prior to changing the hardware or software, provide notice to the recipient. The notice must describe the revised hardware and software required to access the statement and inform the recipient that a new consent to receive the statement in the revised electronic format must be provided to the furnisher. After implementing the revised hardware and software, the furnisher must obtain from the recipient, in the manner described in paragraph (a)(2)(i) of this section, a new consent or confirmation of consent to receive the statement electronically.
(iv) Examples. The following examples illustrate the rules of this paragraph (a)(2):
(3) Required disclosures—(i) In general. Prior to, or at the time of, a recipient's consent, the furnisher must provide to the recipient a clear and conspicuous disclosure statement containing each of the disclosures described in paragraphs (a)(3)(ii) through (a)(3)(viii) of this section.
(ii) Paper statement. The recipient must be informed that the statement will be furnished on paper if the recipient does not consent to receive it electronically.
(iii) Scope and duration of consent. The recipient must be informed of the scope and duration of the consent. For example, the recipient must be informed whether the consent applies to statements furnished every year after the consent is given until it is withdrawn in the manner described in paragraph (a)(3)(v)(A) of this section or only to the statement required to be furnished on or before the January 31st immediately following the date on which the consent is given.
(iv) Post-consent request for a paper statement. The recipient must be informed of any procedure for obtaining a paper copy of the recipient's statement after giving the consent described in paragraph (a)(2)(i) of this section and whether a request for a paper statement will be treated as a withdrawal of consent.
(v) Withdrawal of consent. The recipient must be informed that—
(A) The recipient may withdraw a consent by writing (electronically or on paper) to the person or department whose name, mailing address, telephone number, and e-mail address is provided in the disclosure statement;
(B) The furnisher will confirm the withdrawal and the date on which it takes effect in writing (either electronically or on paper); and
(C) A withdrawal of consent does not apply to a statement that was furnished electronically in the manner described in this paragraph (a) before the date on which the withdrawal of consent takes effect.
(vi) Notice of termination. The recipient must be informed of the conditions under which a furnisher will cease furnishing statements electronically to the recipient.
(vii) Updating information. The recipient must be informed of the procedures for updating the information needed by the furnisher to contact the recipient. The furnisher must inform the recipient of any change in the furnisher's contact information.
(viii) Hardware and software requirements. The recipient must be provided with a description of the hardware and software required to access, print, and retain the statement, and the date when the statement will no longer be available on the Web site.
(4) Format. The electronic version of the statement must contain all required information and comply with applicable revenue procedures relating to substitute statements to recipients.
(5) Notice—(i) In general. If the statement is furnished on a website, the furnisher must notify the recipient that the statement is posted on a website. The notice may be delivered by mail, electronic mail, or in person. The notice must provide instructions on how to access and print the statement. The notice must include the following statement in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” If the notice is provided by electronic mail, the foregoing statement must be on the subject line of the electronic mail.
(ii) Undeliverable electronic address. If an electronic notice described in paragraph (a)(5)(i) of this section is returned as undeliverable, and the correct electronic address cannot be obtained from the furnisher's records or from the recipient, then the furnisher must furnish the notice by mail or in person within 30 days after the electronic notice is returned.
(b) Effective/applicability date. The rules in this section apply to returns for calendar years beginning after December 31, 2010.
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Treas. Reg. §1.6050W-2(a)Electronic furnishing of statements—(1) In general.
Electronic furnishing of statements—(1) In general. A person required by section 6050W to furnish a written statement (furnisher) regarding payments made in settlement of payment card and third party network transactions to the person to whom it is required to be furnished (recipient) may furnish the statement in an electronic format in lieu of a paper format. A furnisher who meets the requirements of paragraphs (a)(2) through (a)(5) of this section is treated as furnishing the required statement.
(2) Consent—(i) In general. The recipient must have affirmatively consented to receive the statement required under section 6050W in an electronic format or, in the alternative, have previously consented to receive other federal tax statements in an electronic format from the furnisher. The consent may be made electronically in any manner that reasonably demonstrates that the recipient can access the statement in the electronic format in which it will be furnished to the recipient. Alternatively, the consent may be made in a paper document if it is confirmed electronically. Consents must be kept at all times available for inspection by the Internal Revenue Service. Recipients currently receiving electronic communications from the furnisher may elect to receive the statement required under section 6050W in a paper document in lieu of an electronic format. The election to receive a paper document may be made by notifying the furnisher electronically or in a paper document.
(ii) Withdrawal of consent. The consent requirement of paragraph (a)(2)(i) of this section is not satisfied if the recipient withdraws the consent to receive electronic statements and the withdrawal takes effect before the statement is furnished. The furnisher may provide that a withdrawal of consent takes effect either on the date it is received by the furnisher or on a subsequent date. The furnisher may also provide that a request for a paper statement will be treated as a withdrawal of consent.
(iii) Change in hardware or software requirements. If a change in the hardware or software required to access the statement creates a material risk that the recipient will not be able to access the statement, the furnisher must, prior to changing the hardware or software, provide notice to the recipient. The notice must describe the revised hardware and software required to access the statement and inform the recipient that a new consent to receive the statement in the revised electronic format must be provided to the furnisher. After implementing the revised hardware and software, the furnisher must obtain from the recipient, in the manner described in paragraph (a)(2)(i) of this section, a new consent or confirmation of consent to receive the statement electronically.
(iv) Examples. The following examples illustrate the rules of this paragraph (a)(2):
(3) Required disclosures—(i) In general. Prior to, or at the time of, a recipient's consent, the furnisher must provide to the recipient a clear and conspicuous disclosure statement containing each of the disclosures described in paragraphs (a)(3)(ii) through (a)(3)(viii) of this section.
(ii) Paper statement. The recipient must be informed that the statement will be furnished on paper if the recipient does not consent to receive it electronically.
(iii) Scope and duration of consent. The recipient must be informed of the scope and duration of the consent. For example, the recipient must be informed whether the consent applies to statements furnished every year after the consent is given until it is withdrawn in the manner described in paragraph (a)(3)(v)(A) of this section or only to the statement required to be furnished on or before the January 31st immediately following the date on which the consent is given.
(iv) Post-consent request for a paper statement. The recipient must be informed of any procedure for obtaining a paper copy of the recipient's statement after giving the consent described in paragraph (a)(2)(i) of this section and whether a request for a paper statement will be treated as a withdrawal of consent.
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Treas. Reg. §1.6050W-2(b)Effective/applicability date.
Effective/applicability date. The rules in this section apply to returns for calendar years beginning after December 31, 2010.
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Treas. Reg. §1.6050W-2(v)Withdrawal of consent.
Withdrawal of consent. The recipient must be informed that—
(A) The recipient may withdraw a consent by writing (electronically or on paper) to the person or department whose name, mailing address, telephone number, and e-mail address is provided in the disclosure statement;
(B) The furnisher will confirm the withdrawal and the date on which it takes effect in writing (either electronically or on paper); and
(C) A withdrawal of consent does not apply to a statement that was furnished electronically in the manner described in this paragraph (a) before the date on which the withdrawal of consent takes effect.
(vi) Notice of termination. The recipient must be informed of the conditions under which a furnisher will cease furnishing statements electronically to the recipient.
(vii) Updating information. The recipient must be informed of the procedures for updating the information needed by the furnisher to contact the recipient. The furnisher must inform the recipient of any change in the furnisher's contact information.
(viii) Hardware and software requirements. The recipient must be provided with a description of the hardware and software required to access, print, and retain the statement, and the date when the statement will no longer be available on the Web site.
(4) Format. The electronic version of the statement must contain all required information and comply with applicable revenue procedures relating to substitute statements to recipients.
(5) Notice—(i) In general. If the statement is furnished on a website, the furnisher must notify the recipient that the statement is posted on a website. The notice may be delivered by mail, electronic mail, or in person. The notice must provide instructions on how to access and print the statement. The notice must include the following statement in capital letters, “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” If the notice is provided by electronic mail, the foregoing statement must be on the subject line of the electronic mail.
(ii) Undeliverable electronic address. If an electronic notice described in paragraph (a)(5)(i) of this section is returned as undeliverable, and the correct electronic address cannot be obtained from the furnisher's records or from the recipient, then the furnisher must furnish the notice by mail or in person within 30 days after the electronic notice is returned.
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