Reg. § 31.3406(b)(3)-1 Reportable payments of rents, commissions, nonemployee compensation, etc.
(a) Section 6041 and 6041A(a) payments subject to backup withholding A payment of a kind, and to a payee, that is required to be reported under section (relating to information reporting of rents, commissions, nonemployee compensation, etc.) or a payment that is required to be reported under section (relating to information reporting of payments to nonemployees for services) is a reportable payment for purposes of section . See of this section for an exception concerning payments aggregating less than $600. See for the requirement to furnish a statement to the payee if tax is withheld under section .
(b) Amount subject to backup withholding
(1) In general The amount of a payment described in of this section subject to withholding under section is the amount subject to reporting under section or section .
(2) Net commissions Withholding under section does not apply to net commissions paid to unincorporated special agents with respect to insurance policies that are subject to reporting under section , provided that no cash is actually paid by the payor to the special agent.
(3) Payments aggregating $600 or more for the calendar year
(i) In general A payment is a reportable payment under of this section only if the aggregate amount of the current payment and all previous payments to the payee during the calendar year aggregate $600 or more. The amount subject to withholding is the entire amount of the payment that causes the total amount paid to the payee to equal $600 or more and the amount of any subsequent payments made to the payee during the calendar year. This does not apply to gambling winnings (as provided in ).
(ii) Exceptions
(A) The $600 aggregation rule The $600 aggregation rule of of this section does not apply if the payor was required to make an information return under section or for the preceding calendar year with respect to payments to the payee, or the payor was required to withhold under section during the preceding calendar year with respect to payments to the payee that were reportable under section or .
(B) Determination of whether payments aggregate $600 or more In determining whether payments to a payee aggregate $600 or more during a calendar year for purposes of withholding under section , the payor must aggregate only payments of the same kind made to the same payee. For this purpose, payments are of the same kind if they are of the same type, regardless of whether they are reportable under the same section. However, a payor with different paying departments making reportable payments of the same kind is not required to aggregate payments made by all those departments unless it is the payor's customary method to aggregate those payments. A payor may, in its discretion, aggregate—
(1) Payments not of the same kind to the same payee, reportable under either section or ; and
(2) Payments reportable under section with payments reportable under section .
[T.D. 8637, 60 FR 66117, Dec. 21, 1995]