Red Tape Reduction Act of 2025

This bill amends the Internal Revenue Code to change the reporting rules for third party settlement organizations (like payment apps or online marketplaces) by raising the threshold for when they must report transactions to the IRS and by clarifying how backup withholding applies to those transactions. It applies to transactions settled after December 31, 2024.

Sec. 2, Reinstatement of exception for de minimis payments as in effect prior to enactment of American Rescue Plan Act: This section changes the reporting requirement for third party settlement organizations. They only have to report a payee's transactions if the total amount paid to that payee exceeds $10,000 or the total number of transactions with that payee exceeds 50 in a calendar year. This takes effect for transactions settled after December 31, 2024.

Sec. 3, Application of de minimis rule for third party network transactions to backup withholding: This section says that a payment from a third party network transaction is subject to backup withholding only if the payee's total number of transactions in that year exceeds 50 and the total amount exceeds $10,000. However, if the payee had reportable payments in the prior year, this exception does not apply. This takes effect for calendar years beginning after December 31, 2024.