Section 2102 of the Small Business Jobs Act of 2010 increased penalties for failure to file information returns, failure to furnish correct payee statements, and for intentional disregard of the law.

Under section 6721 of the Internal Revenue Code, penalties may be assessed for failure to file correct information returns by the due date, without reasonable cause. This includes forms in the 1099 series. The penalty may also apply if you show incomplete or incorrect information, or file on paper when you were required to file electronically, or fail to file machine readable paper forms.

For returns required to be filed January 1, 2011, or later, the penalty for each information return filed is as follows:

• $30 per return if you correctly file within 30 days; the maximum penalty is $250,000 per year. For small businesses, the maximum penalty is $75,000 per year.
• $60 per return if you correctly file more than 30 days after the due date but by August 1; the maximum penalty is $500,000 per year. For small businesses, the maximum is $200,000 per year.
• $100 per return if you correctly file after August 1; the maximum penalty is $1,500,000 per year. For small businesses, the maximum penalty is $500,000 per year.

The penalty for failure to furnish correct payee statements under IRC 6722 increases to $100 per return. The maximum penalty under this provision is $1,500,000 per year. For small businesses, the maximum penalty is $500,000 per year. These penalties may be reduced as follows:

• For failures corrected within 30 days after the due date, the penalty is reduced to $30 per return. The maximum penalty is $250,000 per year. For small businesses, the maximum penalty is $75,000 per year.
• For failures corrected on or before August 1 the penalty is reduced to $60 per return. The maximum penalty is $500,000 per year. For small businesses, the maximum is $200,000 per year.

Small businesses for this purpose are those with gross receipts of not more than $5,000,000.

The penalty for intentional disregard is $250 per return for all filers. There is no maximum annual amount for this penalty.

Beginning in 2012, these amounts will be adjusted annually for inflation.

For information on information return penalties, including exceptions, see the General Instructions for Certain Information Returns.

For a discussion of other issues involving information reporting requirements, see the Third Party Reporting Information Center.