Massachusetts recently passed legislation in the Fiscal Year 2018 budget that grants the Commissioner of Revenue the authority to create additional reporting requirements that differ from the federal requirements under the Internal Revenue Code. Using this authority, the Commissioner of Revenue has made changes to the reporting requirement of third party settlement organizations (“TPSOs”) relating to Form 1099-K, effective beginning with the 2017 calendar year.
Under IRC Section 6050, TPSOs are required to file Form 1099-K when a certain threshold is met: more specifically, when the gross amount paid in settlement to a payee exceeds $20,000, and the number of transactions between a TPSO and a payee exceeds 200 transactions.
Massachusetts, through the Commissioner of Revenue, updates this threshold to become more inclusive. Beginning with the 2017 calendar year, the Department of Revenue will require that TPSOs report the gross amount paid in settlement to a payee when the gross amount paid in settlement is $600 or greater and is subject to taxation under Massachusetts General Law (M.G.L.) Chapter 62(4), irrespective of the number of transactions between the TPSO and the payee. This obligation to report to the Department of Revenue and the payee stands even if the TPSO does not have a federal reporting obligation. A TPSO may use either federal Form 1099-K or the state-specific Form M-1099-K to report information to the Department of Revenue.
All Form 1099-K must be filed with the Department of Revenue and furnished to the payee by January 31 following the end of the tax year.
To review the reporting requirement in full, please click here.
About the Author
Paul Ogawa is a Junior Regulatory Counsel at Sovos Compliance. As part of the Regulatory Analysis team, his main areas of focus are state and federal tax withholding, the Affordable Care Act (ACA), and Canadian tax information reporting. Prior to Sovos, Paul worked as a litigation attorney in Boston area law firms, representing clients in insurance subrogation claims, family law matters, and employment disputes. Paul is a member of the Massachusetts Bar, earned his B.A. from Brandeis University and his J.D. from the Suffolk University Law School.More Content by Paul Ogawa