S. 1425 – Red Tape Reduction Act of 2025

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Updated November 24, 2025 at 1:04 AM UTC

The Red Tape Reduction Act of 2025 changes the tax reporting rules for third‑party settlement organizations. It restores a “de minimis” exemption so these organizations only have to report transactions that exceed $10,000 in total or involve more than 50 individual payments. The bill also links the exemption to backup‑withholding rules, making such payments reportable only when the same thresholds are met, unless the prior year already required reporting. The changes affect settlement firms, the businesses or individuals they pay, and the IRS reporting and withholding processes.

Key Provisions

Restores the de minimis exception in Section 6050W(e): a settlement organization must report only if the total amount exceeds $10,000 or the number of transactions exceeds 50.
Applies the same thresholds to backup‑withholding under Section 3406(b)(8): payments are reportable only when they meet the amount or transaction‑count limits, with an exception if the prior year’s payments were already reportable.
Sets the effective date for these rules to transactions settled after December 31, 2024, and for calendar years beginning after that date.

Legislative Activity

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1 earlier action

SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance.

Finance Committee

April 10, 2025

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SenateIntro Referral

Introduced in Senate

April 10, 2025

SenateIntro Referral

Read twice and referred to the Committee on Finance.

Finance Committee

April 10, 2025

Bill Text

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Introduced in SenateIssued April 10, 2025

II

119th CONGRESS

1st Session

S. 1425

IN THE SENATE OF THE UNITED STATES

April 10, 2025

Mr. Cassidy (for himself and Ms. Hassan) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to modify the exception for de minimis payments by third party settlement organizations.

1.

Short title

This Act may be cited as the Red Tape Reduction Act of 2025.

2.

Reinstatement of exception for de minimis payments as in effect prior to enactment of American Rescue Plan Act

(a)

In general

Section 6050W(e) of the Internal Revenue Code of 1986 is amended to read as follows:

(e)

Exception for de minimis payments by third party settlement organizations

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—

(1)

the amount which would otherwise be reported under subsection (a)(2) with respect to such transactions exceeds $10,000, or

(2)

the aggregate number of such transactions exceeds 50.

.

(b)

Effective date

The amendment made by this section shall apply to transactions settled after December 31, 2024.

3.

Application of de minimis rule for third party network transactions to backup withholding

(a)

In general

Section 3406(b) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:

(8)

Other reportable payments include payments in settlement of third party network transactions only where aggregate transactions exceed reporting threshold for the calendar year

(A)

In general

Any payment in settlement of a third party network transaction required to be shown on a return required under section 6050W which is made during any calendar year shall be treated as a reportable payment only if—

(i)

the aggregate number of transactions with respect to the participating payee during such calendar year exceeds the number of transactions specified in section 6050W(e)(2), and

(ii)

the aggregate amount of transactions with respect to the participating payee during such calendar year exceeds the dollar amount specified in section 6050W(e)(1) at the time of such payment.

(B)

Exception if third party network transactions made in prior year were reportable

Subparagraph (A) shall not apply with respect to payments to any participating payee during any calendar year if one or more payments in settlement of third party network transactions made by the payor to the participating payee during the preceding calendar year were reportable payments.

.

(b)

Effective date

The amendments made by this section shall apply to calendar years beginning after December 31, 2024.