The IRS released a modified private letter ruling superseding a ruling issued in late 2015 under Section 6050W.  That ruling had determined that the party requesting the ruling was a third-party settlement organization.  The new ruling does not change the conclusion, but removes one rationale upon which the earlier ruling had based its determination.

In PLR 201604003, the IRS indicated that the party requesting the ruling was a third-party settlement organization, in part because it was the only party that had all the information necessary to report on Form 1099-K accurately.  This is because it was the only party who was aware of the gross amount of the reportable payment transactions.  PLR 201619006 removed this paragraph from the ruling.  The rationale in the original ruling raised questions for practitioners because it is a factor that is not present in the 6050W statute or regulations.  It was unclear whether the IRS would consider a party that might not otherwise be a third-party settlement organization to be a third-party settlement organization if it was the only party with the required information.  Similarly, if a party that otherwise would have been a third-party settlement organization lacked the required information, would it not be required to file Forms 1099-K?  It is unclear whether the IRS removed the language because it was an invalid basis for its determination or if the IRS learned that the facts differed from those in the original ruling.

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Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.