OBBB Eases and Adds Info Reporting Obligations

The new tax and budget bill, also known as the OBBB, includes changes to existing federal information reporting requirements, including raising the reporting thresholds for commonly filed Forms 1099 and adding new information reporting obligations for entities that make certain automobile loans. These changes are in addition to the employer-related information reporting changes made by the new law related to qualified tips and overtime pay. On Aug. 7, the IRS announced that withholding tables and reporting obligations will not be changing for 2025 and that transition relief guidance is forthcoming.

Higher threshold for Form 1099-MISC and Form 1099-NEC

Generally, Section 6041 requires reporting for payments of $600 or more of fixed and determinable income made in the course of a trade or business, and Section 6041A requires reporting for payments of $600 or more made in the course of a trade or business by direct sellers and service recipients. Form 1099-MISC, Miscellaneous Information,” generally is used for reporting these payments, however, Form 1099-NEC, “Nonemployee Compensation,” is required to be used to report payments of nonemployee compensation that meets the threshold. Reportable payments under these provisions are subject to the backup withholding rules.

For payments made after Dec. 31, 2025, the OBBB increases the threshold for reporting payments under Section 6041 and Section 6041A to $2,000, with indexing for inflation. This change applies to both Form 1099-MISC and Form 1099-NEC. The backup withholding rules have been adjusted to match the new threshold.

Crowe observation

"The increase to $2,000 represents a meaningful win for filers after years of unsuccessful legislative attempts to raise the reporting threshold. While the new threshold is lower than some prior proposals, it significantly reduces the reporting burden.

Form 1099-K threshold rollback

Generally, Section 6050W requires certain payment settlement entities to report payments on Form 1099-K. In the case of third-party settlement organizations (TPSOs), prior to enactment of the American Rescue Plan Act of 2021 (ARPA), reporting was required if the aggregate amount paid to a payee during the calendar year was more than $20,000 and involved more than 200 transactions (pre-ARPA threshold). Payments could be subject to backup withholding without regard to the threshold.

ARPA reduced the reporting threshold to $600, regardless of the number of transactions involved, for payments made on or after Jan. 1, 2022. The lower threshold was delayed for 2022 and 2023, and transition relief made the threshold $5,000 for 2024 and $2,500 for 2025.

Effective for payments made after 2024, the OBBB restores the pre-ARPA threshold for Form 1099-K reporting. TPSOs again are required to file Form 1099-K only if aggregate payments made to a single payee exceed $20,000 and involve more than 200 transactions during a calendar year. This change effectively repeals the lower $600 reporting threshold enacted by ARPA. The OBBB also modifies the backup withholding rules to apply to Form 1099-K reporting only if the $20,000 and 200-transaction threshold is satisfied.

This legislative reversal provides welcome relief for platform-based sellers and gig economy participants, essentially nullifying the lower $600 threshold that would have dramatically expanded reporting obligations and receipt of Form 1099-Ks.

New reporting requirement for passenger vehicle loan interest

For 2025 through 2028, the OBBB allows individuals to deduct up to $10,000 a year for payments of qualifying automobile loan interest. The deduction phases out for taxpayers with modified adjusted gross income (MAGI) over $100,000 ($200,000 for joint filers). The deduction is reduced by $200 for each $1,000 (or portion thereof) by which MAGI exceeds the threshold. Generally, qualifying interest is interest paid or accrued on a new, personal-use passenger vehicle, final assembly of which was completed in the United States.

The OBBB also includes a new reporting obligation for lenders in automobile financing transactions. New Section 6050AA requires lenders to report interest received from individuals on automobile loans qualifying for the interest deduction. Reporting applies when interest received totals $600 or more in a calendar year and only applies to payments received in years that qualifying automobile interest is deductible (2025 through 2028). Information required to be reported to the IRS and furnished to the borrower includes:

• Name and address of the individual from whom interest was received
• Amount of interest received for the calendar year
• Amount of outstanding principal on the loan as of the beginning of the calendar year
• Date of origination of the loan
• Vehicle year, make, and model and vehicle identification number
• Any other information the U.S. Department of the Treasury secretary requires

Crowe observation

The IRS will need to create a new form for Section 6050AA reporting. Lenders will need to update their systems to capture the data fields listed.

Looking ahead

The OBBB’s increased thresholds for Form 1099-MISC, Form 1099-NEC, and Form 1099-K are a win for taxpayers and address longstanding concerns around potential overreporting and burden on filers. However, the OBBB also includes new reporting requirements to increase individual compliance, including reporting to align with the new auto loan interest deduction. Information return filers should consult their tax advisers to evaluate necessary system changes, vendor data collection processes, and reporting protocols in preparation of guidance regarding transition rules for 2025.