Do K‑BID affiliates need to issue 1099s to consignors?

 

A practical guide after the § 6050W rule change

1. Why this matters

Beginning with the 2024 tax year, the 1099‑K filing threshold for “third‑party settlement organizations” (TPSOs) will fall in stages from $20,000 to $5,000 (for 2024 returns) and ultimately to $600. Understandably, many auctioneers worried that this would force them to file a flood of 1099‑Ks to every consignor they pay. The Wall Street Journal

2. Where auctioneers stand today

In response to a formal inquiry relayed through the National Auctioneers Association, the IRS Office of Chief Counsel said that a typical auction company is not a TPSO because:

• The auctioneer and the seller are the only two parties to the contract;

• Funds are merely escrowed, then passed through, not settled on a “network” of unrelated payees;

• A true TPSO is more akin to a credit‑card processor or payment app that settles transactions for thousands of unrelated merchants. Mike Brandly, Auctioneer Blogauctioneers.org

Key takeaway: For the vast majority of K‑BID affiliates, the proceeds you forward to a consignor do not trigger a Form 1099‑K filing obligation.

3. What about 1099‑MISC or 1099‑NEC?

• Sale of merchandise is specifically excluded from 1099‑MISC/NEC reporting.

• You do still file 1099‑NEC for service providers you hire (photographers, movers, trucking firms, etc.) when total payments reach $600. IRSIRS

4. When could an affiliate end up with a 1099‑K anyway?

If you use PayPal, Stripe, Square, or another processor to accept buyer payments and that processor remits gross funds directly to you, the processor itself is the TPSO. It may send you a 1099‑K once your own gross receipts on its platform exceed the annual threshold. That document reports your revenue, not the consignor’s. IRS

5. Recommended best practices

Action	Why it helps
Collect a signed W‑9 from every consignor.	Confirms the seller’s tax ID so you can answer IRS inquiries if one arises.
Separate seller proceeds from buyer funds in your bank software or QuickBooks class codes.	Creates a clean audit trail showing you are passing through money, not earning it.
Download and save any 1099‑Ks your payment processor issues to you.	You may need to reconcile gross figures to your books.
Brief consignors that they are responsible for reporting their gain or loss.	Transparency avoids last‑minute panic at tax time.
Consult your CPA if you escrow funds for related parties or operate in multiple legal entities.	Edge‑case structures could change your status.

6. A sample affiliate blurb for your terms & conditions

Tax reporting: K‑BID affiliates are not classified as “third‑party settlement organizations” under IRC § 6050W. Proceeds paid to consignors therefore do not generate a Form 1099‑K from K‑BID. Consignors remain responsible for reporting any taxable gain from the sale of their property. Please consult your tax advisor.

7. The bottom line

• For routine consignments, no 1099‑K, 1099‑MISC, or 1099‑NEC is required from you to the consignor.

• You will still receive (and must reconcile) a 1099‑K from any card processor you use once you cross its threshold.

• Always keep solid records and involve a qualified tax professional for unusual arrangements.

(This article is informational only and not legal or tax advice. Affiliates should verify their own compliance requirements with a licensed CPA.)