A participating payee is defined as any person who accepts a payment card as payment or any person who accepts payment made by a third party settlement organization (TPSO) in settlement of a third party network transaction. In the context of third party network transactions, a participating payee is any person who receives payment from a TPSO to settle such transactions.
For example, under Section 6050W, a TPSO is required to report payments in settlement of third party network transactions with respect to any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the number of such transactions. This reporting requirement ensures that payments made through third party networks are properly documented and reported to the IRS.
Sources:
Notice 2023-10
§ 31.3406(a)-2. Definition of payors obligated to backup withhold.
§ 35a.3406-2. Imposition of backup withholding for notified payee underreporting of reportable interest or dividend payments.
§ 3406. Backup withholding
§ 1.6041-1. Return of information as to payments of $600 or more.
§ 6041. Information at source
