How do you determine what qualifies as a 6050W payment network when determining whether a 1099 should be issued?
According to various articles on the internet, Zelle and Venmo do not provide 1099-K's, when payment is not made through a credit card and is made through the ach network. However, PayPal apparently does qualify under 6050W. The articles use the fact that these organizations will not issue the 1099k's as evidence that these organizations are not subject to 6050W.
However, when I read the two relevant regulations below regarding 1099 issuance and the exception for 6050W, it seems that Zelle and compare it to basic information on their website, it seems that Zelle is a centralized company that requires users to sign up and transmits through a third party payment mechanism under the definitions listed under the regulations and code section?
It seems that the person issuing the 1099 really doesn't have enough information to determine if a transmission network is subject to 6050W or not? How would you go about determining it?
Quoted Regulations below:
§ 1.6041-1(1)(1)(iv)Information returns required under section 6050W for calendar years beginning after December 31, 2010. For payments made by payment card (as defined in § 1.6050W-1(b)(3)) or through a third party payment network (as defined in § 1.6050W-1(c)(3)) after December 31, 2010, that are required to be reported on an information return under section 6050W (relating to payment card and third party network transactions), the following rule applies. Transactions that are described in paragraph (a)(1)(ii) of this section that otherwise would be subject to reporting under both sections 6041 and 6050W are reported under section 6050W and not section 6041. For provisions relating to information reporting for payment card and third party network transactions, see § 1.6050W-1. Solely for purposes of this paragraph, the de minimis threshold for third party network transactions in § 1.6050W-1(c)(4) is disregarded in determining whether the transaction is subject to reporting under section 6050W.
§ 1.6050W-1(c)(3)Third party payment network.
(i) The term third party payment network means any agreement or arrangement that -
(A) Involves the establishment of accounts with a central organization by a substantial number of providers of goods or services who are unrelated to the organization and who have agreed to settle transactions for the provision of the goods or services to purchasers according to the terms of the agreement or arrangement;
(B) Provides standards and mechanisms for settling the transactions; and
(C) Guarantees payment to the persons providing goods or services in settlement of transactions with purchasers pursuant to the agreement or arrangement.
(ii) A third party payment network does not include any agreement or arrangement that provides for the issuance of payment cards.
(iii) Persons who are providers of goods and services as described in this paragraph (c)(3) are participating payees within the meaning of paragraph (a)(5)(i)(B) of this section.