- 20.1.7.3 Failure to File Correct Information Returns IRC section 6721
- 20.1.7.4 Failure to Furnish Correct Payee Statements IRC Section 6722
- 20.1.7.5 Failure to Comply with Other Information Reporting Requirements IRC Section 6723
- 20.1.7.6 Regulations Requiring Returns on Magnetic Media IRC section 6011(e)
- 20.1.7.7 Failure to File Certain Information Returns, Registration Statements, etc. IRC section 6652(e)
- 20.1.7.8 Failure to Provide Reports on IRAs/Annuities
- 20.1.7.9 Waivers, Definitions and Special Rules IRC Section 6724
- Exhibit 20.1.7-1 500 Series Reference Numbers
- Exhibit 20.1.7-2 600 Series Reference Numbers
- Exhibit 20.1.7-3 PMF Civil Penalty Transcript
- Exhibit 20.1.7-4 TIN Validation
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These instructions apply to late filed information returns received by the Campus with a due date prior to the current processing year. For processing year 2007, this would apply to returns filed for tax years 2005 and prior.
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Penalties for all prior year returns will continue to be assessed manually through IDRS to generate notice CP 215/CP 15 from the Civil Penalty Module (MFT 13/55). These notices will not be preceded by Notice 972CG.
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Receipt and Control will forward these returns to the area responsible for assessing the IRP penalties. ECC-MTB will also forward Form 4804 for assessment of the late filing penalty for returns filed either magnetically or electronically and provide the received date.
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Do not assess any penalties on Forms 1096 if the following conditions are present:
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Delinquent returns secured by Examination or Collection—with "Penalty Considered" coded on the form. Examination or Collection Compliance previously considered penalties on these returns. If not present, code an "E" in the first box under "Official Use Only" on Forms 1096 secured by Examination and a "C" in this box for forms secured by Collection.
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A Form 1096 "N" coded on the top the form indicates that penalties were considered by Receipt and Control.
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If any of these conditions exist, notate "Penalty Considered" (if not present) and forward the Forms 1096 and associated returns to the IRP unit in Receipt and Control for processing.
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If the returns were submitted with an explanation for the late filing, consider reasonable cause as appropriate.
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If the filer's explanation establishes reasonable cause and the penalty will not be assessed, with managerial approval, take the following actions:
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Using CC REQ54 file the correspondence and a copy of the Form 1096 as source documents.
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Send the filer Letter 1948C explaining our determinations,
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Circle out or line through the date stamp and the delinquent return indicator ( "X" in first box under "Official Use Only" ). Do not make any additional markings on the form.
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Annotate the 1096 "Reasonable Cause Established" and forward to the IRP unit in Receipt and Control for processing.
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( Note: only the 3 most recent prior years can be processed through ISRP.) Penalties will be considered against earlier years although not processed through ISRP. After penalty consideration, send these returns to Files.
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If the filer's explanation does not establish reasonable cause and the penalty will be assessed, take the following actions:
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Research using IDRS to ensure that the maximum has not been reached before assessing any further penalties.
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Use reference number 500 to make assessments for late filed information returns.
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Create a case file containing a copy of the Form 1096/1099 or Form 4804 transmittal document and any postmarked material (if sent from ECC-MTB).
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Enter delinquent indicator "P" in the first box under "Official Use Only" on Form 1096 followed by the received date in MMDDYY order. Forward the original Form 1096 and associated returns to the IRP unit in Receipt and Control for processing.
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Forward the case file to Files for association with the adjustment document.
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Do not assess penalties against any Federal agency.
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Late filed Forms W–2 are identified by the Social Security Administration (SSA). This information is posted to the Payer Master File (PMF) for the penalty program.
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Only Forms W–2/W–3 that are included in Notice 972CG (i.e., waiver or extension granted) will appear on the PMF. Other Forms W–2/W–3 submitted by employers are currently not posted to the PMF. These may be researched using CC BMFOLU, if necessary.
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Extensions and waivers for Forms W–2 that have been approved and meet penalty criteria will post to PMF, even if the forms are not subject to a penalty.
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For forms not listed on the waive or extension listing, refer to LEM 20.1.7
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The PMF records for late filed Forms W–2/W–3 will not include a received date but should include the entry "Late SSA" and penalty indicators 1, 2, or 3 to show whether the $15, $30, or $50 (respectively) penalty applies. This indicator does not appear on PMFOLD.
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SSA will date stamp Forms W–3 transmittals for delinquent Forms W–2 filed on paper.
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Microfilm copies of Forms W–3 will be forwarded to the Campus from Wage Information Retrieval System (WIRS)Unit.
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Generally, filers must establish reasonable cause for the penalty to be abated.
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If the filer requests a copy of the Form 1096 which resulted in the penalty, request a microfilm print of the Form 1096 and send it to the filer. The DLN of the Form 1096 that resulted in the penalty can be found on the PMF transcript.
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If the SCRIPTS copy of the Form 1096 is not available after repeated attempts, follow procedures in LEM 20.1.7.3.4.3.
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Filers may request copies of transmittal Forms 4804 submitted with Forms 1099 etc., filed electronically or on magnetic media or provide received dates for electronic media or the documents may be required to answer the filer's question about the penalty assessment. These procedures will apply to responses to Notice 972CG and replies to any subsequent balance due notices.
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The Campus must contact ECC-MTB to request date stamped copies of these forms for late filed magnetic media or electronic returns.
Note:
ECC-MTB will continue to provide Forms 4804 in advance for the Campus to make certain manual assessments.
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ECC-MTB needs the filer's name, TIN, and the transmitter's control code (TCC) (available on the PMF transcript). Also provide the return type, number of returns, the received date and the DLN of the submission.
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ECC-MTB will furnish the forms within two weeks.
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Written requests should be submitted to ECC-MTB using Form 3210. ECC-MTB will also accept requests by FAX.
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Campuses should batch their requests and submit them to ECC-MTB no more than once a week except in extreme cases.
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Campuses should use their established ECC-MTB contact points to coordinate requests by mail or FAX.
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If necessary, contact the Headquarters Office for assistance.
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To prevent unauthorized disclosures, sanitize Forms 4804 to exclude all other filers' data before being mailed to the filer. This does not apply to the "transmitter" information on Form 4804.
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If ECC-MTB is not able to provide copies of Forms 4804 in disputed cases, follow procedures in LEM 20.1.7.3.4.3.
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If the filer requests a copy of Form W–3, send a photocopy to the filer. If Form W-3 is not available, follow the procedures in LEM 20.1.7.3.4.3.
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If the filer requests a copy of Form(s) W–2 filed on paper or if copies of Form(s) W–2 would help to resolve a case, they may be requested from WIRS (Inform the filer that it will take 6 weeks to receive copies of the documents. DO NOT submit a request to WIRS for Forms W–2 filed electronically. Follow procedures in LEM 20.1.7.3.4.3
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Campuses may use discretion to determine when sending paperwork that may be helpful, e.g., the paperwork shows the actual number of documents processed by SSA which equals the number of documents penalize.
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Campuses must ensure that the information on the paperwork applies only to the employer in question to prevent an unauthorized disclosure.
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Returns (Forms 1099) filed on magnetic media/electronically with unprocessable conditions are returned to the filer by ECC-MTB for corrections
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When a correction is required to change the return type, e.g. a return originally filed as INT income was actually DIV income, the filer must file two returns to make the correction.
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A corrected INT return is filed (with zero money amounts) to zero out the original INT return, and
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A replacement DIV return is filed as an original return.
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All current year late filing penalty cases are compared to the extensions of time to file that post to the PMF prior to the generation of penalty notices. See also LEM 20.1.7.3.4.3.
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However, if a filer responds with an approval letter from ECC-MTB granting an extension, check to see if the filer's TIN appears on the extension listing provided by ECC-MTB.
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If present, the penalty should be abated.
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The Service assesses penalties for cases referred by the Social Security Administration (SSA) when there is a discrepancy between wages reported on Forms W-2 and what is reported to the Service on Forms 941. SSA will make two attempts to contact the employer to resolve the discrepancy. If SSA is unable to resolve the discrepancy, the cases are sent to the Service.
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An SSA discrepancy is identified when the employer reports more Social Security Wages to the Service than to SSA.
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An SSA discrepancy is resolved when the employer files missing Forms W-2, files Forms W-2C, reports adjustments to their Form 94X (Form 941C process) or submits other information to resolve the discrepancy.
Upon receipt of these cases, please refer to CAWR IRM 4.19.4.
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Penalty Assessment: If the discrepancy is not resolved by filing missing Forms W-2, filing Forms W-2C, reporting adjustments to Form 94X (Form 941C process) , or providing an explanation of the discrepancy, the Service is directed to assess a penalty. Please follow instructions provided by IRM 4.19.4.
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The Late Filing penalty will be assessed for Forms W-2 secured by CAWR. Please follow instructions provided in IRM 4.19.4 relating to assessing the late filed penalty on these cases.
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The Failure to File penalty is assessed if Forms W-2 are not submitted or discrepancies are not resolved in response to the initial CAWR correspondence. If the failure to file penalty is applicable, please follow guidelines in IRM 4.19.4.
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Intentional Disregard: The penalty is assessed using Reference Number 549. Reference IRM 4.19.4.
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Forms W-3 involved in CAWR penalty assessments will not appear on PMFOL or the PMF transcript.
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The Payer Master File (PMF) generates a penalty proposal notice when a filer fails to comply with the magnetic or electronic media filing requirements for information returns. Failure to file in the required manner, i.e., on magnetic media or in other electronic machine-readable form as provided under IRC Section 6011(e) and the regulations thereunder will result in a penalty.
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A penalty of $50 per return is proposed for each return filed on paper in excess of the magnetic media threshold. This criterion applies separately to each document type and separately for amended returns. The penalty should not be assessed if an undue hardship waiver was granted by ECC-MTB and posted to the PMF.
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Filers may avoid a penalty by establishing reasonable cause for the failure. See IRM 20.1.7.9 for definitions of reasonable cause and IRM 20.1.7.9.2 for the special abatement conditions.
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All current year magnetic media and electronic penalty cases are compared to the waivers of the magnetic media filing requirement that post to the PMF prior to the generation of penalty notices.
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However, if a filer responds with anapproval letter from ECC-MTB granting a waiver of the magnetic media or electronic filing requirement, check to see if the filer's TIN appears on the waiver listing provided by ECC-MTB. If present, the penalty should be abated using the correct Penalty Reason Code (PRC).
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If the TIN is not on the waiver listing, further explanation is required.
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If the taxpayer's response indicates that duplicate data was provided on paper and magnetic or electronic media:
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First attempt to verify using the PMF transcript or PMFOL and any supporting documentation sent by the filer.
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If no supporting documentation is found on the PMF transcript or PMFOL, contact ECC-MTB and provide the filer's name, TIN, EIN, Transmitter Control Code (TCC) if available, tax year, type of return and the number of returns filed. See LEM 20.1.7.
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If the filer requests a copy of the Form(s) 1096 which resulted in the assessment on paper Forms 1098/1099, request a SCRIPS print of the Form(s) 1096 and send it to the filer. The DLN of the Form 1096 can be found on the PMF transcript and on PMFOLD.
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If the SCRIPS print of Form 1096 is not available after research, sanitize the page(s) of the PMF transcript containing the 1096 record(s) relevant to the penalty and send the filer a copy with an explanation.
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If the filer requests a copy of the Form(s) W-3 which resulted in the assessment on paper Forms W-2 send a photocopy to the filer.
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If the Form W-3 is not available, sanitize the page(s) of the PMF transcript containing the W-3 record(s) relevant to the penalty and send the filer a copy with an explanation.
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Do not submit a request to WIRS for copies of the Forms W-3.
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If the filer requests a copy of the Forms W-2 which resulted in the assessment, request the document from WIRS using the microfilm sequence number(s) provided on the PMF transcript. Indicate W-3 and all W-2s in the remarks area. Inform the filer that it will take about 6 weeks to obtain microfilm copies of the Forms W-2.
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When the Forms W-2 are received from WIRS, count to verify that the penalty agrees with the number of documents processed (eliminate blanks, voids, and subtotal forms).
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If the volume is lower than the penalty assessed, send the documents to the filer with Letter 1948C explaining that the penalty will be adjusted accordingly. (See LEM 20.1.7)
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The following information will be useful when working responses to Form W-2 electronic penalty cases. However, see LEM 20.1.73.4.6 for further information.
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If the filer questions why the number of Forms W-2 penalized does not agree with the volume entered on Form(s) W-3 by the filer, explain that the penalty is based on the actual number of return processed by SSA. Blanks, voids, and subtotal forms are not counted. In addition, the discrepancy may have occurred because the preparer entered an incorrect figure on Form W-3.
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If the response indicates that only magnetic media or electronic media was filed or if the filer does not seem to understand why the penalty was assessed, send a copy of the Form W-3 along with Letter 1948C explaining that the W-3 is a record of the paper forms filed with SSA.
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If the filer used a prior year Form W-3, check the signature date to determine what year the returns were submitted.
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The penalty for failure to file in the proper format is assessed for unprocessable paper returns and electronic returns identified by the Campus and ECC-MTB. This penalty is manually assessed by the Campus (CP215 or CP 15). It is not preceded by Notice 972CG.
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For both paper and electronic media, the documents are returned to the filer (during initial processing) along with a letter explaining the problem and requesting correction and resubmission by a specific date.
Note:
For paper returns, only a sample of the unprocessable returns are returned to the filer to identify the problem. However, the filer is asked to resubmit the entire submission.
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Filers are also advised of the applicable penalties for not resubmitting the returns timely. If processable returns are submitted beyond the date requested, the filer is subject to a late filing penalty.
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Returns are referred to the penalty unit for the improper format penalty if they are still unprocessable at the processing cut off for the year.
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The penalty will be assessed at $50 per return and is computed by multiplying the number of unprocessable returns by $50. See LEM 20.1.7.3.4.7. The de minimus exception does not apply to the improper format penalty.
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The Correspondence unit will receive copies and unsatisfactory responses to Letters 1865C from Receipt and Control along with the payee documents that cannot be processed. If unable to resolve, send to IRP penalty unit for penalty consideration with an explanation on the transmittal that the taxpayer failed to respond adequately.
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ECC-MTB will refer Forms 4804 to the Campus for assessment of the penalty. The case is referred to the Campus for the penalty only if the filer does not return the file to ECC-MTB or if the file was returned but was still unprocessable at the end of the processing year.
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ECC-MTB will refer to the Campus any unresolved, unreturned solicitations for corrected magnetic or electronic media (ECC-MTB will purge the case and upon nonreceipt will notify the Campus of the DLN) . The Campus will send CP215 to the submitter assessing the proposed penalty amounts. Any corrected tapes will be submitted to ECC-MTB from the Campus asking for input as to the correctness of the assessment.
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If it appears that the filer only corrected the sample of unprocessable paper returns that were mailed with Letter 1865C, the Campus may contact the filer to clarify that the entire submission must be resubmitted (per Letter 1865C). Allow the filer 30 days to respond before assessing the penalty.
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Prior to assessing the penalty for unprocessable magnetic or electronic media returns (Form 4804), check IDRS for the presence of a late filing or magnetic or electronic media penalty assessed for the same number of returns filed on paper.
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If an assessment is present, request a PMF transcript for manual assessments to determine if the penalty is for the same returns.
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If confirmed, notate the date and Penalty Considered on the 4804, associate with the closed case and refile. See LEM 20.1.7.
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If it is determined that the previous assessment is for different returns, assess the penalty based on the information on Forms 4804/4802.
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Only the actual returns which cannot be processed will be subject to the failure to file in the proper format penalty. Receipt and Control will separate the submission into processable and unprocessable.
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Any processable returns will have been input with original Form 1096.
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The unprocessable returns will be forwarded to the Penalty Unit for assessment action with a photocopy of Form 1096.
Note:
The "Total number of documents" filed on Form 1096 should have been changed by Receipt and Control to reflect the number of unprocessable documents subject to penalty.
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Verify the number of unprocessable documents subject to penalty by excluding voided and blank forms, and returns not required to be filed by law based on the dollar amount reported or exempt status.
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ECC-MTB will count the entire submission as unprocessable and, if the number of documents cannot be discerned, will propose the maximum penalty with affirmation from Headquarter Operations. Prior year submissions will also be considered.
If returns are received from Receipt and Control which are processable, return the entire submission to the IRP Unit in Receipt and Control with an explanation.
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The penalty is to be assessed on the Civil Penalty Module.
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If the unprocessable returns were also filed late the first time they were filed, check PMFOL to see if an extension was also granted, for the return type and tax year in question. If an extension was also granted, use reference number 503. If an extension was not granted, use reference number 506.
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If a sufficient number of returns were submitted to require magnetic or electronic media filing, check PMFOL to see if a waiver was granted for the return type and tax year in question. See LEM 20.1.73.4.7. If a magnetic media waiver was also granted, use reference number 503. If a waiver was not granted, use reference number 508.
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If the returns were filed late and the volume was large enough to require magnetic media filing, check for the extension and waiver. If both were granted, use reference number 503. If neither was granted, use reference number 511. If an extension was granted but no waiver, use reference number 508. If a waiver was granted but no extension, use reference number 506.
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If the assessment is input on or before July 1 of filing year, the Campus should include a quick note with the notice. The quick note should contain the following statement: The penalty was assessed at $50 per return but it will be reduced if the corrected forms are submitted on or before August 1, 20XX.
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Processable returns (paper) resubmitted after the date requested in Letter 1865C should be processed unless the penalty amount is less than $500 (10 submissions calculated at $50 per submission).
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Unprocessable returns (paper) should be forward via transmittal to the IRP penalty unit for penalty consideration. The letter sent to the taxpayer should be attached to the transmittal. The transmittal should clearly note that the returns are submitted for penalty consideration due to lack of response from taxpayer.
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Generally filers must establish reasonable cause for the penalty to be abated. See IRM 20.1.7.9.1 for definitions of reasonable cause and IRM 20.1.7.9.2.9 for the special abatement conditions. See LEM 20.1.7.3.4.8, for further instructions.
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If the filer submits corrected returns in response to the penalty notice, Receipt and Control will notate the CP15/215 Processable returns submitted and also notate the received date and the number of returns submitted.
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Review the filer's response to determine if the explanation establishes reasonable cause.
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If the filer's explanation does not establish reasonable cause, and the received date indicates that the $50 penalty should be reduced (see LEM 20.1.7), recalculate the penalty at $15 or $30 per return as appropriate. The penalty should only be adjusted for the number of processable returns received as noted on the CP15/215.
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Also include the following explanation: We received your corrected information returns on _. The penalty you were previously assessed for filing unprocessable Forms _ has been reduced to $XX.XX per return. You will receive an adjusted balance due notice.
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If the filer submits processable returns in response to the notice but the explanation provided does not meet reasonable cause, disallow the claim.
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Filers who file an information return with a missing TIN, or a TIN determined to be incorrect or not currently issued by the Service, are subject to a penalty of $50 per return.
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After the TIN validation process is performed to identify payee records with missing and incorrect TINs/names, this data is transmitted to the Payer Master File for inclusion in the penalty proposal notice.
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See Exhibit 20.1.7–5 for details on how the Service performs TIN validation to determine which TINs are incorrect or not currently issued.
Note:
When a TIN is identified as incorrect, either the TIN or name may be incorrect.
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A paper or tape listing of payee records with missing or incorrect TINs is sent to the filer along with the proposal notice. Publication 1586, Reasonable Cause Regulations and Requirements as They Apply to Missing and Incorrect TINs, is also included in this mailing. It provides a detailed explanation of the action the filer is required to take upon receiving the listing.
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For a payer making a reportable payment to a payee, the payer must make an initial solicitation for the payee's TIN at the time the account is opened.
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If the payer does not receive a TIN as a result of the initial solicitation, he/she must complete a first annual solicitation by December 31 of the year in which the account was opened, or by January 31 of the following year if the account was opened in December.
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If the payee does not receive a TIN as a result of the first annual solicitation, he/she must complete a second annual solicitation by December 31 of the year immediately following the calendar year in which the account was opened.
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Filers are required to review payee accounts to verify whether or not they have completed the required solicitations (request TINs from payees) to show reasonable cause to have the penalty waived or abated.
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See IRM 20.1.7.9.2 for the general solicitation requirements for TINs and the general reasonable cause criteria in IRM 20.1.7.9.2 to determine if the penalty should be waived or abated.
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Also see LEM 20.1.7 for the special abatement criteria.
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If the filer's response indicates they do not understand why they received the notice and/or what actions they are required to take, provide a brief explanation in Letter 1948C and refer them to the Publication 1586.
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If the filer has included corrected returns for prior years in response to the notice, advise the filer that corrections for name/TINs are not required for prior years. Filers should be advised to update their records and reflect the correct data on any returns filed in the future. However, an employer should file a Form W-2C, Corrected Wage and Tax Statement, even if the employer is only filing Form W-2C to correct an employee's SSN.
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If corrected returns are provided for current year returns, route them to the Receipt and Control Function for processing.
Note:
Filers are required to submit other corrections for information returns (e.g., money amounts) for current year returns.
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If the filer submits examples of garbled information on the TIN listing apologize for the inconvenience and advise that no action is necessary.
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Filers must compare the listings of incorrect and/or not currently issued TINs received from the Service with their records to determine if the name/TIN combination included on the listings agrees or disagrees with their records.
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In general, if an account number is provided on the listing, the filer need only identify any account or accounts with that corresponding number or designation that has the same name/TIN combination. If no account number is provided, the filer must use reasonable care to identify all accounts that relate to the same incorrect name/TIN combination.
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If the name/TIN combination on the listing agrees with their records, the filer must perform the required annual solicitation if not completed previously.
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If the name/TIN combination on the listing disagrees with its records, the filer must determine whether:
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An error was made when filing the information return. If so, the filer must include the correct information on any future information returns. However, an employer should file a Form W-2C, Corrected Wage and Tax Statement, even if the employer is only filing Form W-2C to correct an employee's SSN.
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The information in their records has changed since filing the information return. If so, the filer must include that information on any future information returns,
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The Service changed the information during processing. If so, the filer should notate their records and take no further action.
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In all the instances outlined above, the filer should notate their records and provide this information in their reply to the 972CG Notice.
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Notice 972CG, Notice of Proposed Civil Penalty, is mailed to give filers an opportunity to establish reasonable cause for waiver of penalties prior to assessment. The notice includes proposed penalties for failure to file timely, failure to file on magnetic or electronic media and missing and incorrect TINs. Notice 972CG is assigned the reference number which corresponds to the penalty proposed, e.g. reference number 500 for the failure to file timely penalty.
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Filers are allowed 45 days to respond to the notice and to submit an explanation as to why the penalty should be waived. Filers may also submit a payment if they fully or partially agree or sign a consent to allow the Service to send a bill for the balance due. *NOTE-The decision to assess or not assess the penalty should not be made based on the amount of payment received. Reasonable Cause Criteria must be applied in all instances.
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The penalty will be assessed against filers who do not submit a satisfactory explanation or who fail to respond to the notice. All penalties will be manually assessed.
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Notice 972CG is not posted to the master file or shown on any IDRS or CFOL Command Codes. Campuses may open an IDRS control base on MFT 13 or 55 after mailing the notices immediately upon receipt of a reply. This will prevent a delay in taking necessary interim or closing actions after the response is reviewed. When the control base is opened enter Notice 972CG or 972CGREPLY in the ACTIVITY and OTHER as the category code. (Special Category Code CVPN should be established for these cases).
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Campuses should maintain a suspense file for Notice 972CG which contains the:
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Notice,
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TIN listing (if applicable)
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CP215/15A, Summary of Your 20XX Information Return Penalties.
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These file should be maintained in TIN order.
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Files should be maintained for 180 days.
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Review responses to Notice 972CG to determine if the penalty should be waived for reasonable cause in the same manner as replies to penalty assessment notice (CP215/15). See the appropriate section in IRM 20.1.7.3 to respond to replies for penalties proposed for late filing, magnetic media, and TINs.
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See IRM 20.1.7.9.1 for reasonable cause criteria and IRM 20.1.7.9.2.9 for special abatement conditions.
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Filers may be granted an extension for up 30 days to respond to the notice. For notices that were initially undeliverable, or required a recreate (see IRM 20.1.7.1.6.3.4), the new notice date is the date stamped when the notice is mailed a second time. See LEM 20.1.7.
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Campuses must review replies fully and give filers the opportunity to submit additional information regarding their case before making a decision of whether or not to assess the penalty.
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If the explanation establishes reasonable cause:
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Send letter 1948C explaining the decision.
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Input a TC 290.00 on MFT 13 or 55, using Blocking Series 15, for BMF accounts or on MFT 55 using BS 05 for IMF accounts.
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Use Reason Code (RC) 62 and/or the appropriate 4th position Reason Code, Hold Code (HC) 3, Penalty Reference Number (PRN) from the Notice 972CG and amount 0.00 .
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File Notice 972CG, correspondence, and a print of the Letter 1948C with your adjustment document.
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If the filer agrees with part of the penalty and establishes reasonable cause for the remainder (reasonable cause not denied for any amounts)
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Send letter 1948C explaining the decision, an explanation of how to avoid future penalties and that the balance due notice will follow (if not paid in full). Use Reason Code 62 and the appropriate Penalty Reason Code.
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Input the assessment on MFT 13 or 55 for the agreed penalty amount using BS 52 if it's a first assessment on the module, or BS 53 if a previous adjustment is already present.
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Use Reason Code 62 and/or the appropriate 4th position reason code for the amount being waived, HC 3, PRN from 972CG and penalty amount for the part of the penalty being assessed.
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Monitor the assessment to ensure that it posts.
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If the explanation does not establish reasonable cause or the abatement request is partially denied:
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Input the assessment for any penalty amount for which the filer did not provide an acceptable explanation.
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Do not use Reason Code 62 if the penalty is being assessed in full, and use Hold Code 0.
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If waiver or abatement is partially denied, use the appropriate Reason Code(s) for the portion being waived/abated and Hold Code 3. Use the PRN from the 972CG.
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Input a separate transaction using TC 290, 0 , BS 98, RC 62 in the 1st position, do not enter a 4th position code and HC 3. To delay the posting of the second transaction for one cycle, use Posting Code Delay Code 1 with this transaction.
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Send Letter 854C stating the reason(s) the explanation was not accepted. Also state the penalty amount assessed and that a balance due notice will follow. Correspondence should only be sent to the responsible individual and not to a joint account.
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File the case.
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Monitor the assessments to ensure that they post.
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See (12)-(16) below before assessing the penalty if the reply indicates that the filer is no longer in business or there was a change in business organization, i.e. partnership to corporation. (Assess the penalty unless criteria in (12)-(16) below applies.)
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Use care when adjusting penalty amounts when two or more penalties (late, magnetic media, or TIN) apply to the same document.
Example:
If 500 Forms 1099–DIV were filed late (April 5) and fifty of these returns had incorrect TINs, the proposed penalty on Notice 972CG would be calculated at 50 x $50 (TINs) plus 450 x $15 (late). If the filer submits a satisfactory explanation for the 50 incorrect TINs, but not for filing late, the penalty should be recalculated at 500 x $15 for the CP215/15 notice.
-
If a payment was received, the amount will be notated on the response page by the Deposit function. Acknowledge any payment received in correspondence with the filer.
-
If a full payment is received and there are no disagreed items or a partial payment is received and the filer submits a satisfactory explanation for the remainder, input the adjustment on MFT 13 or 55. Use Hold Code 3
-
See LEM 20.7.1 for purge dates
-
If Freeze Code —Z is on the account, send the case to Criminal Investigation. Do not assess the penalty.
-
Prior to assessing the penalty, check for undeliverables or no response cases.
-
Use BMFOL to check Form 941 (MFT 01) modules for the presence of Collection Compliance transaction:
-
A TC 530 with CC10 (defunct corporation),
-
TC 530 with CC07 (bankrupt/insolvent corporation), (See IRM 20.1.7.9.6 for more information on bankruptcies.) or
-
TC 480/7890 (Offer in Compromise pending (OIC)).
-
If a TC 530 with either closing code is present, do not assess the penalty.
-
-
Check the tax year in question and subsequent years. If an unreversed TC 480 is present, check for the case file assignment number and notify the responsible Collection Compliance function of the pending assessment. Collection Compliance must include this assessment in the OIC.
-
A TC 480 may be reversed with:
-
TC 481 — OIC requested,
-
TC 482 — OIC withdrawn, or
-
TC 483 — Correction of an erroneous TC 480.
Note:
Since it is not unusual to have more than one TC 480 posted in a module, a careful review of the entire module should be done before taking any action.
-
-
Also, apply the criteria in (14) if a filer's response to Notice 972CG indicates they are either a defunct or bankrupt corporation; check for the appropriate transaction code.
-
Each Campus should have available for monitoring, monthly as well as cumulative totals for each category.
-
Number of Notice 972CG mailed and referred to Exam (RTC/FDIC Notices during mailout), total Notices mailed and referred to Exam.
-
Number of receipts (replies) Notice 972CG.
-
Number of replies/no responses as follows: (1) Reasonable Cause Waiver Granted, (2) Reasonable Cause Waiver Denied — assessment for full amount, (3) Reasonable Cause Waiver Partially Denied — Partial Assessment, (4) Penalty Waived for Other than Reasonable Cause, (5) Partially Agreed — no disallowed items, (6) Fully Agreed, (7) Case closed to Exam, (8) Purged-assessment input for no reply and undeliverable cases, (9) Open replies (Cum receipts minus items 5–10), (10) No reply suspense (line 3 minus CUM receipts minus line 12), (11) Total of items 5 through 14 on report.
-
Receipts (Replies) to CP 215/15.
-
Abatements (after CP215/15): Full, Partial Referrals to Appeals, Number (abatements) requested or done by Appeals.
-
Only count notices in one category.
-
The monthly report should continue until the Campus has purged no reply cases and resolved all open cases (reply received) for Notice 972CG. The penalty analyst will notify the unit when to stop reporting for abatements of CP215/15.
-
-
IRC section 6722 provides for a penalty when a payee statement is not timely or correctly furnished, The $50 penalty is imposed for each failure to:
-
Furnish a payee statement on or before the due date to the person to whom the statement must be furnished,
-
Furnish all information required, and
-
Furnish correct information.
-
-
No more than one penalty will be imposed per payee statement, even though a statement may contain more than one failure.
-
For purposes of IRC section 6722, the term payee statement means any statement required to be furnished as described in Reg. 301.6722–1(d)(2).
-
The total amount imposed on any filer for all failures to furnish a payee statement during any calendar year shall not exceed $100,000.
-
A composite substitute payee statement is a single document created by the filer to reflect several types of payments made to the same payee. Each composite statement shall be treated as though each type of payment (or other required information) were a separate statement with each type of payment being subject to the penalty.
-
This statement must be on a form acceptable to the Service. See Publication 1179, Specifications for Paper Document Reporting and Paper Substitutes for Forms 1096, 1098, 1099 Series, and Forms 5498 and W-2G. See Publication 1141, General Rules and Specifications for Substitute Forms W-2 and W-3.
-
The $50 penalty for failure to furnish payee statements is not reduced if returns are corrected or filed after the due date.
-
The IRC section 6722 penalty should not be imposed if an error or omission is inconsequential.
-
The Intentional Disregard of the Rules and Regulations Penalty applies when the facts and circumstances show that the filer knowingly or willfully failed to comply with the requirements of IRC sections 6722.
-
Intentional disregard occurs when a filer who knows, or should know of a rule or regulation, chooses to ignore its requirements. The facts should show the filer:
-
Was required to provide a statement,
-
Knew or should have known of the requirement to provide the statement, and
-
Consciously chose not to provide the statement or recklessly disregarded (i.e. ignored) the duty to provide the statement.
-
-
Treas. Reg. 301.6721–1(f)(3)(i) provides that a pattern of failures indicates intentional disregard. The greater the number of failures, the greater the likelihood some of those failures could be due to intentional disregard. Additional indications of the existence of intentional disregard are:
-
Did the filer correct the failure promptly after the discovery of the failure,
-
Did the filer correct the failure within thirty days after notification of the failure by the Service,
-
Did the filer avoid an administrative inconvenience, and
-
Was the cost of compliance greater than the IRC section 6722(a) penalty.
-
-
Intentional disregard may exist when it would be less expensive to pay the penalty under 6722(a) rather than comply with the requirement to provide a statement. Treas. Reg. 301.6722–1(c)(2). Check payee's prior history of compliance to determine intentional disregard.
-
The Intentional Disregard of the Rules and Regulations Penalty amounts to:
-
$100 for each payee statement required to be filed, or if greater:
-
10 percent of the amount of income required to be reported on payee statements for dividends, patronage dividends, interest, fishing boat operators, royalties, and wage and tax statement, or
-
5 percent of the amount required to be reported on the payee statements for brokers, exchange of partnership interest, or disposition of donated property payments.
-
-
Form 8300 Penalty. The Intentional Disregard penalty for failing to provide a payor of cash with a statement as required by IRC sections 6050I(e) is the greater of $100 or 10 percent of the amount required to be provided on the statement.
-
These penalties are asserted by field Examination personnel.
-
The taxpayer may be offered an administrative preassessment appeal.
-
-
There is no maximum dollar limitation for the Intentional Disregard of the Rules and Regulations Penalty under IRC section 6722.
-
No more than one penalty per failure can be imposed, even if there is more than one failure on the same statement.
-
The penalty shall not be assessed if an error or omission is inconsequential. An error or omission is inconsequential when the failure does not prevent:
-
The timely receipt of correct information, or
-
The payee from putting the information to its intended use.
-
-
Errors or omissions are never considered inconsequential if they relate to:
-
A dollar amount,
-
A significant item in the payee address,
-
Use of the appropriate form for the information provided, whether or not it is an acceptable substitute for the official IRS form, and/or
-
The delivery of the information return to the payee either in person or by first class mail (in a mailer which alerts the payee that the statement is enclosed) under the following: IRC section 6042(c), Returns Regarding Payments of Dividends and Corporate Earnings and Profits, IRC section 6044(e), Returns Regarding Payments of Patronage Dividends, IRC section 6049(c), Returns Regarding Payments of Interest, and or IRC section 6050N(b), Returns Regarding Payments of Royalties.
-
-
For any information return or payee statement due (without regard to extensions) , a penalty of $50 per failure will be imposed for each failure to provide all the required information timely.
-
No more than one penalty can be imposed for the same return. For example, if a return has more than one error or omission and the penalty amount for those failures differs, the penalty will be imposed at the higher amount.
-
A penalty of $50 is imposed for failure to comply timely with specified information reporting requirements or for each failure to include correct information. The maximum penalty for failure to comply with all specified information reporting requirements is $100,000 per year.
-
Multiple penalties may be imposed on one document if the failures relate to more than one of the following requirements:
-
IRC section 6050K(c)1–notification of exchange of partnership interest,
-
IRC section 6109–supplying identifying numbers, (1) includes his/her TIN on a return, statement or document other than an information return or payee statement, (2) furnishes his or her TIN to another person, (3) the TIN of any other person whose number is required to be shown on a return, statement of document other than an information return or payee statement, (4) the TIN of a return preparer.
-
IRC section 215–Alimony, etc., Payments, (1) the person receiving separate maintenance is required to furnish his or her TIN to the individual making separate maintenance payments, and (2) the person making the separate maintenance payment is required to furnish on their return the TIN of the person receiving the separate maintenance payment.
-
IRC section 6109(e)-Furnishing Number for Certain Dependents, Include on his/her return, the TIN for any dependent who is claimed as an exemption on an income tax return, and has reached 1 year of age before the close of the taxable year.
-
-
However, no more than one penalty per document may be imposed if the failure could be penalized for both :
-
Failure to timely comply, or
-
Failure to include all the required information.
-
-
The Intentional Disregard penalty as it applies to IRC section 6723 was repealed by P.L. 101–239. For returns and statements required to be filed after December 31, 1989, Intentional Disregard will not be considered.
-
An inconsequential error or omission is not considered a failure to comply with a specified information reporting requirement. Therefore, the penalty shall not be assessed.
-
The term inconsequential means any failure that does not make it difficult for the Service to put the information to its intended use, or prevent a payee from timely receiving correct information and reporting it on his or her return.
-
Information Returns::
-
A filer must file on magnetic media or in an electronic format when filing more than 250 returns of the same type.
-
If a filer timely filed paper returns, but was required to file magnetic media returns, the $50 failure to file penalty will apply to the number of returns, of one type, required to be filed that exceed 250.
-
-
The penalty for failing to file information returns required in connection with certain plans of deferred compensation applies for each failure to file Forms 1099–R due after December 31, 1998.
-
Specific information relating to Tax Exempt/Government Entities will be addressed by Tax Exempt/Government Entities.
-
The trustee of an Individual Retirement Account, the issuer of an IRA, or Simplified Employment Pension (SEP) may be assessed a penalty of $50 for each failure to:
-
Furnish or file a return (Form 5498) within the time and manner prescribed, or
-
Furnish or file a disclosure statement, a governing instrument, or an amendment.
-
-
There is no limitation to the amount of the penalty for returns required under IRC section 6693(a).
-
The penalty under IRC section 6693(a) shall not apply if the trustee or issuer of an annuity establishes reasonable cause. See IRM 20.1.7.9.
-
IRC section 408(O)(4) generally requires any individual who makes a nondeductible contribution to an individual retirement plan for any taxable year, to file Form 8606, Nondeductible IRAs (Contributions, Distributions and Basis).
-
A $100 penalty may apply if an individual overstates the amount of their nondeductible contributions for any taxable year.
-
The penalty may be abated if the overstatement is due to reasonable cause.
-
-
Deficiency procedures do not apply.
-
Generally, an information reporting penalty may be waived if it can be shown that the error was due to reasonable cause and not due to willful neglect.
-
See IRM 20.1.1 for discussion of Penalty Relief. The term Penalty Relief includes Reasonable Cause, Statutory Exception, Administrative Waiver, or Service Error.
-
The Service may waive (abate or not assess) an information return penalty when a filer requests a waiver of the penalty and establishes reasonable cause. See LEM 20.1.7.9.1.
-
If the request properly establishes reasonable cause, the penalty may be abated using normal procedures.
-
If reasonable cause is not established, disallow the request using normal procedures.
-
If additional information is needed to substantiate a request for the waiver of a penalty due to reasonable cause, contact the taxpayer.
-
In all cases involving unauthorized third party requests, correspond directly with the taxpayer to inform them of the action taken. Send Letter to the unauthorized third party explaining that you have responded directly to the taxpayer and include a paragraph in the taxpayer's letter requesting that the taxpayer notify the third party of our direct reply to the taxpayer. See LEM 20.1.7.9.1.
-
If the correspondence contains the penalty of perjury language it must contain the affected taxpayer's signature or the signature of the taxpayer's authorized representative. Return correspondence to the taxpayer with Letter 1382C. The signature requirements are as follows:
-
For corporations , the statement must be signed by the president, vice-president, treasurer, assistant treasurer, chief accounting officer or other officer duly authorized to sign returns and other documents. The fact that an individual within the corporation signed the statement shall be accepted as evidence that the individual is authorized to sign on behalf of the corporation (IRC section 6062).
-
For partnerships,the statement may be signed by any one of the partners.
-
For joint individual accounts,the statement must contain the signature of one of the taxpayers who signed the original return to be considered a valid request.
-
-
Reasonable cause for the information return penalties exists when :
-
the filer acted in a responsible manner, both before and after the failure occurred, and
-
There are significant mitigating factors, or
-
The failure was the result of circumstances beyond the filer's control.
-
-
Acting in a Responsible Mannerwould include exercising the same degree of care that a reasonably prudent person (or organization) would use in the course of its business in determining filing obligations and in handling account information such as account numbers and balances. The filer must act in a responsible manner both before and after the failure occurs.
-
Acting in a responsible manner also includes taking steps to avoid the failure, for example:
-
Requesting appropriate extensions of time to file when practical to avoid the failure,
-
Attempting to prevent a failure if it was foreseeable,
-
Acting to remove an impediment or the cause of the failure, and
-
Correcting the failure as promptly as possible, generally within 30 days.
-
-
Where a penalty is imposed for missing or incorrect TINS, a filer must comply with special rules for acting in a responsible manner. See IRM 20.1.7.9.2.
-
When reviewing a filer's request for a waiver, the following questions must be addressed to determine if the filer has acted in a responsible manner.
-
Do the reasons address the penalty that was assessed?
-
Does the length of time between the event cited as a reason and the filing date negate the event's effect?
-
Does the continued operation of a business after the event that caused the filer's noncompliance negate the event's effect?
-
Should the event that caused the filer's noncompliance or increased liability have reasonably been anticipated?
-
Was the penalty the result of carelessness or did the filer appear to have made an honest mistake? (Carelessness and forgetfulness are the same as civil willful neglect and are not examples of ordinary business care and prudence).
-
Has the filer provided sufficient detail (dates, relationships) to determine whether they exercised ordinary business care and prudence?
-
Is a non-liable person being blamed for the filer's noncompliance? What is the nature of the relationship between the taxpayer and the individual? Is the individual an employee of the taxpayer or an independent third party such as an accountant or lawyer?
-
Has the filer documented all pertinent facts, i.e., death certificate, doctor's statement, insurance statement for proof of fire, etc.?
-
Does the filer have a history of being assessed the same penalty?
-
Could the filer have requested an extension or filed an amended return?
-
-
A waiver should not be automatically granted where the filer claims ignorance of the filing requirements. However, ignorance of the law may be considered as one factor which may indicate that the filer acted in a responsible manner if all the other facts support this contention.
-
Significant mitigating factors— For the filer to establish reasonable cause under this category, the filer must show that they acted in a responsible manner as well as the existence of a significant mitigating factor. Events generally considered to be significant mitigating factors include, but are not limited to:
-
First time filer--prior to the failure, the filer had not previously been required to file this particular form or statement (See LEM 20.1.7. or
-
The filer has a history of complying with the information return reporting requirements. See LEM 20.1.79.1. Significant consideration is given to:
-
If the filer was previously penalized under IRC sections 6721, 6722, or 6723.
Example:
failures which are not penalized because they are within the "de minimus" exception are not considered to have been penalized for purposes of evaluating a filer's compliance history.
-
A filer may not continually rely on the same explanation to establish reasonable cause, when the filer's compliance history indicates a pattern of failures. A filer is expected to take significant steps to prevent future failures of the same type. Consider the Intentional Disregard provisions.
-
Determine if the filer was previously penalized. If so, did the error rate decrease from one year to the next? Consider the Intentional Disregard provisions.
-
The filer's history of compliance should be considered whether or not the filer specifically requests abatement on this basis.
-
Compliance history must be considered, along with the other evidence provided, to determine if the penalty should be abated. The fact that the filer previously had a penalty should not be the only criteria used to decide if the penalty should be abated/waived.
Example:
A good compliance history may benefit a filer who can show that they acted in a responsible manner, but cannot show that an event beyond the filer's control caused the failure.
-
However, if the filer can show that he/she acted in a responsible manner and the failure was due to an event beyond the filer's control, then a penalty in a prior year should not be used as cause not to abate/waive the penalty.
-
-
The filer contacted a tax advisor who was competent on the specific tax matter, furnished necessary and relevant information, and was then incorrectly advised that the filing of a return was not required. If the filer exercises normal business care and prudence based on its information and knowledge in determining whether to secure further advise, reasonable cause may apply.
-
Events beyond the filer's control— for the filer to establish reasonable cause under this category, the filer must show that it acted in a responsible manner, as well as the event being beyond the filer's control. Events generally considered beyond the control of the filer include (but are not limited to ) the following.
-
Actions by the Service-- To establish an event beyond the filer's control as the result of actions by the Service, the filer must show it relied on erroneous written information provided by the Service. The filer must also show that reliance on the written advise was reasonable and that it relied in good faith on the information. The filer must provide:
-
A copy of the written information provided by the Service including the name of the Service employee, and the date the erroneous advice was received,
-
A copy of the request for information including, the steps taken and the specific facts given to the Service, and the answer received.
-
This information should be used in determining whether the taxpayer has shown reasonable cause for taking a position on the return giving rise to the penalty.
-
Reasonable cause will not be established if the filer did not provide the Service with all the facts and circumstances when requesting the advice.
-
Reasonable cause may beestablished if the filer did not file a return after receiving erroneous information from the Service or the filer timely requested necessary tax forms and instructions, and the Service did not provide them timely.
-
-
Actions of an Agent-- For a filer to establish events beyond the filer's control as the result of actions of an agent (imputed reasonable cause), the filer must show that:
-
It exercised reasonable business judgment when contacting the agent, allowing the agent to timely file correct returns, or furnish correct payee statements,
-
The filer provided the agent with proper information well in advance of the due date of the return or statement, and the agent satisfied the significant mitigating factors, or an event beyond the agent's control occurred which could establish reasonable cause.
-
A filer who contracted with an agent and cannot establish reasonable cause based on the actions of the agent as described above, may be able to demonstrate reasonable cause on its own merits by having an established history of complying with the information reporting requirements, and otherwise acting in a responsible manner both before and after the failure occurred.
-
-
Actions by the Payee or any other Person--For the filer to establish reasonable cause as the result of actions by the payee or any other person with respect to the return or payee statement, the filer must show that:
-
The payee, or other person, failed to provide the necessary information to the filer, or
-
The payee, or other person failed to provide correct information to the filer.
-
The filer must provide documentary evidence when requested by the Service showing that the failure was attributable to the payee.
-
See IRC 6724 for special solicitation requirements that a filer must follow to establish reasonable cause if the failure of the filer to provide a TIN was due to the actions of the payee.
-
The filer contacted a tax advisor who was competent on the specific tax matter, furnished necessary and relevant information, and was then incorrectly advised that the filing of a return was not required. If the filer exercises normal business care and prudence based on its information and knowledge in determining whether to secure further advice, reasonable cause may apply.
-
-
Unavailability of business records—the business records must have been unavailable as a result of unforeseen conditions, and in a manner which would prevent timely compliance (ordinarily at least a two week period prior to the due date (or extended due date) of the information return, and the unavailability was caused by a supervening event.
-
A supervening event includes, but is not limited to:
-
A fire or other casualty that damages the business records or impairs the system for processing such records,
-
A statutory or regulatory change that relates directly to the data processing and is made so close to the time the information return or statement is required that for all practical purposes the change cannot be made,
-
The unavoidable absence (death or serious illness) of the person with the sole responsibility for filing a return or furnishing a statement. In the case of a corporation, estate, trust, etc., the death or serious illness must have been that of an individual having sole authority to file the return (not the individual preparing the return). If another person shares responsibility for filing the return and that other person is unaffected by the event, the event is not an event beyond the filer's control.
-
-
The return was delivered to the IRS after its due date by the United States Postal Service if it was correctly addressed, mailed, and postmarked before the due date by the United States Postal Service, or a private postal meter, (see LEM 20.1.7.9.1.) as long as delivery was within the time period a document mailed from the same point of origin ordinarily would be received if mailed on the last day prescribed for filing the return. If the return is received after the due date, the filer must establish the return was deposited in the mail on or before the due date, the delay in receiving the return was due to a delay in the transmission of the mail, and the cause of the delay.
-
The taxpayer's statement that they erroneously addressed their return to the state taxing agency does not in itself constitute reasonable cause for filing late, since a properly addressed envelope is a legal requirement in determining timely mailing/filing (IRC section 7502(a)(2)(B)).
-
Further documentation of the circumstances that resulted in the taxpayer misdirecting the returns must be considered evidence the taxpayer acted in a responsible manner and was nevertheless unable to file on time.
-
Acceptable documentation must include all of the following:
-
An excellent filing compliance record,
-
Dated or certified mail documents showing filing made to the state or local taxing agency on or before the return due date, and
-
Evidence that the act of misdirecting the return was due to extenuating circumstances, and not to carelessness or willful neglect. An example of an extenuating circumstance would be confusion caused by a death or serious illness in the immediate family at the time of filing.
-
-
Undue Economic Hardship related to filing on Magnetic or Electronic Media-- When a filer with over 250 returns or statements fails to file on magnetic media as required, the filer must show that they failed to file on magnetic or electronic media because of a lack of hardware and that to meet the requirement would have caused an undue economic hardship. See LEM 20.1.79.1. The filer must show that:
-
The filer attempted to contract out the magnetic or electronic media filing, and the cost was prohibitive as determined on the due date of the return.
-
The filer supported the prohibitive costs with two estimates from unrelated Service bureaus or computer software/hardware companies.
-
the filer filed the returns on paper.
-
The undue economic hardship criteria does not prevent the filer from establishing reasonable cause based on other criteria that would be applicable to the magnetic media penalty. However, caution should be used to ensure that other reasonable cause criteria would be appropriate to the filer's failure to file on magnetic or electronic media.
-
-
Additional magnetic or electronic media events which may be considered beyond's the filer's control include:
-
The filer relied upon an internal computer system which encountered major hardware and/or software problems.
-
Reasonable cause should consider the filer's documentation of the following: (1) nature and severity of problems and efforts to correct in a timely fashion (2) timely and consistent effort exercised by responsible officials within the organization to monitor problems and execution of corrective action, and (3) efforts undertaken by the filer to meet filing obligations, including but not limited to: (a) contracting out to third parties, and/or (b) filing the returns on paper to meet the due date.
-
Reasonable cause may be met if the filer provides documented evidence that they contacted two service bureaus and was informed that service bureaus would not contract for preparation of magnetic or electronic media information returns without contracting for a range of data processing functions such as preparation of payroll/W–2 data, range of accounting functions such as preparation of Profit & Loss, balance sheets, etc., and other functions currently performed by the filer "in-house" or contracted to other third parties.
-
Reasonable cause may be met if a filer is located in geographically remote areas (e.g., Alaska) and has found it impossible to arrange for a magnetic or electronic media processing service. Care should be taken to review filer's documentation to ensure they were diligent in repeated attempts to contract for such service sufficiently in advance of the filing due date.
-
If the filer received an undue economic hardship waiver in a prior year, reasonable cause related to undue economic hardship will be determined on a case by case basis and not ordinarily be established for any subsequent year.
-
-
In general, a filer will have acted in a responsible manner if the filer:
-
Exercised reasonable care to, determine its filing obligations, and handle the account numbers and balances.
-
Took significant steps to avoid a failure, such as requested an extension of time to file; attempted to prevent a foreseeable failure; acted to remove the cause of a failure once it had occurred, and corrected the failure promptly once the cause of the failure had been removed.
-
-
Correction of a failure is ordinarily considered prompt if made within 30 days after:
-
The cause of the failure is removed,
-
The failure is discovered, or
-
The filer's last regular submission for corrections is made (a submission is considered "regular" only if made at intervals of 30 days or less).
-
-
In general, if the filer failed to include a TIN because the payee failed to provide the TIN, the filer will have acted in a responsible manner only by making the required solicitations.
-
The term "solicitation" means a request to the payee to provide a TIN.
-
The TIN will be treated as missing if it
-
Does not contain nine digits, or
-
Includes a mixture of digits and letters.
-
-
In general, an initial solicitation and two annual solicitations are required for missing TINs.
-
An initial solicitation must be made at the time the account is opened. The term account includes accounts, relationships, and other transactions. This requirement is considered met if the TIN is requested either orally or in writing. The request can be made by mail, telephone or other electronic means.
-
If after the initial solicitation, the filer did not receive the TIN:
-
A first annual solicitation must be made by December 31 of the year the account was opened (or the year the transaction occurred), if before December, or
-
By January 31st of the following year (for accounts opened or transaction which occurred in the preceding December).
-
-
If after the first annual solicitation, a TIN was not received:
-
A second annual solicitation must be made by December 31 of the first year following the calendar year in which the account was opened or transaction occurred.
-
The initial and the first annual solicitations relate to the year the account was opened or the transaction occurred.
-
The second annual solicitation relates to the year following the year the account was opened or transaction occurred.
-
-
Forms 1098 require an annual solicitation to the payee until a TIN is obtained.
-
Once the payee's TIN is received, the filer must include the TIN on all information returns filed in the future. In addition, if a Form W-2 was filed using zeros or blanks for the employee's TIN, an employer should file a Form W-2C, Corrected Wage and Tax Statement, even if the employer is only filing Form W-2C to correct an employee's SSN.
-
In general, if the filer has been notified by the Service or a broker of an incorrect TIN, they will have acted in a responsible manner only by making the required annual solicitations.
-
The TIN will be treated as incorrect if the name/TIN combination does not match or cannot be found on the Service or SSA records.
-
Not currently issued TINs and Name/TIN mismatch accounts are considered to be incorrect for purposes of solicitations and penalty assessments under IRC section 6724.
-
In general, the filer is required to make an initial solicitation and no more than two annual solicitations for incorrect TINs.
-
An initial solicitation must be made at the time the account is opened or transaction occurs. This requirement is considered met if the TIN is requested either orally or in writing. The request can be made by mail, telephone or other electronic means.
-
If the filer is notified by the Service or broker that the TIN is incorrect:
-
A first annual solicitation must be made by December 31 of the calendar year in which the filer has been notified, or
-
January 31 of the following year if notified in December.
-
The mailing of the "B" Notice under IRC section 3406(a)(1)(B) satisfies this requirement.
-
-
If the filer is notified by the Service or broker in any calendar year, following the first notification that the TIN is incorrect:
-
A second annual solicitation must be made by December 31 of the calendar year following the calendar year in which the filer was notified, or
-
January 31 of the following year if notified in December.
-
The mailing of the "B" Notice under IRC section 3406(a)(1)(B) satisfies this requirement.
Note:
Filers are not required to show that they backup withheld on payee accounts to satisfy the requirement for waiver of the penalty under IRC section 6724.
If a filer has been notified of an incorrect name/TIN combination under IRC section 3406(a)(1)(B), the filer generally must notify the payee that the payee's account contains an incorrect TIN within 15 business days after the date of the notice from the Service or a broker.
-
-
Forms 1098 require an annual solicitation to the payee until a TIN is obtained.
-
If a corrected TIN (or name) is received, the filer must include it on all information returns filed in the future. In addition, if a Form W-2 was filed with an incorrect SSN for the employee, an employer should file a Form W-2C, Corrected Wage and Tax Statement, even if the employer is only filing Form W-2C to correct an employee's SSN.
-
An annual solicitation by mail must include:
-
A letter stating that the payee must provide its TIN or the payee will be subject to a $50 penalty imposed by the Service,
-
A Form W–9 or acceptable substitute form on which the payee may provide their TIN, and
-
A return envelope.
-
-
An annual solicitation made by telephone must:
-
Be made in a manner that will encourage the payee to provide their TIN,
-
Be a completed call to each person with a missing TIN and include a conversation with an adult member of the household or to an officer of the business or the organization,
-
Include a request for the TIN of the payee, and
-
Inform the payee that if the payee fails to furnish their TIN, the payee is subject to a $50 penalty.
-
-
The filer must maintain concurrent records showing the solicitations were properly made, and provide concurrent records to the Service upon request.
-
When an information reporting provision specifically provides the time and manner for obtaining a TIN, the solicitation requirements in IRM 20.1.7 will not apply. To act in a responsible manner, the filer should comply with the time and manner requirements for requesting the TIN under the applicable IRC section. For Example:
-
For Forms 1099–S, the filer is only required to make an initial solicitation on or before the related real estate closing date.
-
For Forms 1098, the filer is required to do an annual solicitation until the TIN is received.
-
-
The penalty waiver provisions apply when:
-
The solicitation requirements under Treas. Regs. 301.6724–1(e) or (f), or
-
Treas. Regs. 31.3406(d)–5 are met.
-
-
Annual solicitation is not required for a year if:
-
Payments were not made, or
-
A return was not required to be filed.
-
-
If an account is closed in the same year in which a penalty notice is received for the account, the filer must do the solicitation if a payment is required to be made or if the filer is otherwise required to file a return that year.
-
To avoid making more than the required annual solicitations, filers should follow the provisions of Treas. Regs. 3406(a)(1)(B) and Reg. 31.3406(d)-5 for accounts subject to backup withholding mailing, rather than the mailing requirements for Treas. Regs. 301.6724–1(e) and (f). This would apply to Forms 1099–B, INT, DIV, OID, MISC, and PATR.
-
If a filer fails to make one or more of the required solicitations, the filer may satisfy the solicitation requirement by:
-
Making two consecutive annual solicitations in subsequent years, and
-
After receiving the TIN, including it on any information return filed in the future.
-
-
The penalty will apply to:
-
The years the solicitation was not made, and
-
Subsequent years until the filer has completed the make-up solicitations.
-
-
Financial institutions are not required to make annual solicitation by mail on accounts with:
-
Stop-mail, or
-
Hold-mail instructions,
-
As long as they deliver the solicitation in the same manner as they deliver the mail.
-
In cases of window transactions, (one time transactions) as in the issuance of savings bonds.
-
-
A filer is not required to make annual solicitations by mail on accounts where:
-
Previous solicitations have been returned as undeliverable,
-
Other mailings have been returned as undeliverable, and
-
No new address has been provided to the filer.
-
-
In general, no more than two annual solicitations are required to establish that the filer acted in a responsible manner.
-
For information returns, filers may establish reasonable cause by satisfying the requirements for due diligence 6676(b) under the Interest and Dividend Tax Compliance Act of 1983.
-
For information returns which contained a missing or incorrect TIN consider reasonable cause criteria satisfied if at the time the account was opened the filer:
-
Exercised due diligence, or
-
The TIN was requested as follows (1) according to the time and manner of the information provision under which the information return is filed, or if none then, (2) under IRC section 6109, Identifying Numbers, or (3) in a manner that would otherwise have satisfied reasonable cause criteria under IRC section 6676(a).
-
-
Bankruptcy. An unreversed TC 520 and a Freeze code — V are used to identify a payer/filer that is in bankruptcy status. These codes will be present on the MFTRA transcripts.
-
If the unreversed TC 520 has a transaction date of October 22, 1994 or earlier, the assessment is generally prohibited by the Bankruptcy Reform Act of 1994 (The bankruptcy law supersedes the Internal Revenue Code).
-
If there is a TC 520 and a — V freeze on the account: (1) Check directly with the Insolvency Unit supporting the Area. Insolvency Support will advise how to proceed. (2) The TC 520 and — V freeze must be present before a penalty abatement can be considered. However, the penalty should not be abated solely because the response states there is a bankruptcy.
-
If there is no TC 520 and — V freeze on the account, but the payer can provide the necessary information, notify the Area Insolvency Support function. A bankrupt payer will know the bankruptcy petition date, the court where the petition was filed, and the docket number
-
If a —Z freeze is on the account, refer the module to the Criminal Investigation Division. Do not assess the penalty.
-
-
Banks, Trusts Companies, Savings and Loans.Penalties and collection of penalties assessed against insolvent or bankrupt banks, trust companies, or savings and loan associations may be prohibited under IRC section 7507(a). Insolvency includes:
-
The respondent is a bank, trust company or savings and loan association, and
-
The organization is bankrupt and/or protected under IRC section 7507(a).
-
-
If the reply to the penalty proposal or penalty notice indicates that:
-
A failed savings and loan is under the receivership of the Resolution Trust Corporation (RTC), or
-
A failed bank is under the receivership of the Federal Deposit Insurance Corporation (FDIC), refer the case to the Examination Classification Specialist for your Campus. The reply from RTC/FDIC may be received in response to either the penalty proposal notice or after the assessment is made. (Also see (5) below.)
-
If Exam decides that the penalty should be waived, they will refer the case back to the penalty unit to close out the case (or proposal) or to abate the penalty.
-
If the penalty will be sustained, Exam will return the case to the penalty unit to input the adjustment (or proposals) and/or correspond with RTC/FDIC. Exam will provide language to explain to RTC/FDIC why the penalty is not being abated.
-
Exam will notify the penalty unit of their decision to abate or not abate within 10 working days. If not, the penalty unit will follow-up with the designated classification specialist.
-
If a penalty proposal notice with RTC/FDIC shown as the entity was referred to Exam before being mailed, the response from Exam will indicate whether or not the Campus should mail the proposal notice or close the case with no further action.
-
-
For imputed interest, see IRM 20.2.
-
For state agencies, see LEM 20.1.7.
-
If the taxpayer's response indicates that the information returns reported liquidation dividends (Form 1099–DIV), abate or do not assess the penalty or the applicable portion that applies to the liquidation distribution.
-
IRC section 404(k) dividend distributions, reported on Form 1099–DIV, are not subject to penalties under IRC section 6721, 6722, or 6723. These dividends are not true dividend distributions reportable under IRC section 6042, but are Employee Stock Ownership Plan distributions reportable under IRC section 6047, and therefore are subject to penalties under IRC section 6652(e). The Service has allowed the filing community to report ESOP distributions on Form 1099–DIV.
-
For multiple payee documents to an individual payee, see LEM 20.1.7.
-
For magnetic media or electronic media penalties resulting from corporate mergers , see LEM 20.1.7.
-
If a filer is penalized for returns not required to be filed by law, the penalty must be reduced by the number of returns not required to be filed. These returns are dropped systematically for the paper returns processed through OCR and for magnetic or electronic filed returns. However, for ISRP input returns, the returns must be counted manually to determine how many meet the penalty criteria, therefore, it is possible for some errors to occur by counting returns that should be deleted from the count based on the dollar amount.
-
ISRP returns can be identified by the presence of a Campus code in the first two positions of the DLN.
-
If the filer states that the returns were not required to be filed by law (based on the dollar amount), examine the PMF transcript for evidence of the ISRP input returns before making a determination.
-
If ISRP input is verified, abate the applicable portion of the penalty. For example, if the filer submits 100 Forms 1099–INT late and indicates in the reply that 10 were not required to be filed, reduce the penalty by 10 times applicable penalty amount.
-
-
If all returns on the PMF transcript were filed on magnetic or electronic media or OCR processed (first two positions of the DLN are other than the Campus code), send letter 1948C and advise the filer that returns not required to be filed were deducted before we calculated the penalty.
-
Additional exceptions to the filing requirements are shown in the Instructions to filers of Forms 1099, 1098, 5498, and W-2G.
-
The penalty may be waived for a limited number of incorrect TINS if the TIN is incorrect due to a clerical or processing error and the following conditions are met:
-
The filer must show that he acted in a responsible manner by requesting the TIN from the payee,
-
An inadvertent processing or clerical error occurred in preparing the data, which caused the wrong name or TIN to be filed on the information return.
-
-
No statute of Limitations applies to unfiled returns. Penalties may be assessed at any time. See IRC section 6501 (c)(3).
-
For missing or incorrect information on a filed information return, the penalties must be assessed within 3 years after the due date of the return or the date filed, whichever is later. See IRC section 6501 (a).
| Reference Number | IRC Section | Description |
|---|---|---|
| 6721 | Imposition of the Failure to Comply With Certain Information Reporting Requirements • $50 per failure/maximum $250,000 • $15 per failure/maximum $75,000. If a failure is corrected within 30 days after the due date of the return, i.e., the penalty will be decreased to $15 per failure • $30 per failure/maximum $150,000. If the failure is corrected more than 30 days after the due date of the return but on or before August 1 of the filing year, i.e., the penalty will be decreased to $30 per failure. |
|
| 500 | 6721 | Late Filing Penalty • A penalty is charged for each Form 1098, 1099, W-2, or W-2G that was not correctly and timely filed. |
| 501 | 6721 | Magnetic Media Penalty • A penalty is charged for each Form 1098, 1099, or W-2 (after the first 250 forms of each type) required by IRC section 6011 (e)(2)(a) not filed electronically or on magnetic media. |
| 502 | 6721 | Missing or Incorrect TIN Penalty • A penalty is charged for each Form 1098, 1099, W-2, or W-2G submitted with missing or incorrect TINS. |
| 503 | 6721 | Improper Format Penalty • A penalty is charged for each Form 1098, 1099, W-2, or W-2G submitted in an improper format as provided for in the IRC, Treasury Regulations and/or Social Security Administration procedures. |
| 504 | 6721 | Late and Magnetic Media Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was not filed: • Correctly and timely, and • Electronically or using magnetic media (over 250 forms) |
| 505 | 6721 | Late and Missing or Incorrect TIN Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was: •Not correctly and timely filed, and • Submitted with a missing or incorrect TIN, |
| 506 | 6721 | Late and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was not: • Correctly and timely filed, and • Submitted in a proper format as provided for in either the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 507 | 6721 | Magnetic Media and Missing or Incorrect TIN Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was : • Not filed electronically or on magnetic media (over 250 forms) and • Filed with missing or incorrect TINS. |
| 508 | 6721 | Magnetic Media and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was not: • Filed electronically or on magnetic media and • Submitted in a proper format as provided for in the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 509 | 6721 | Missing or Incorrect TIN and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was filed: • With a missing or incorrect TIN, and • In an improper format as provided for in either the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 510 | 6721 | Late, Magnetic Media and Missing or Incorrect TIN Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was: • Not correctly and timely filed, and • Not filed electronically or on magnetic media (after the first 250 forms of each type) required by IRC 6011(e)(2)(a) , and • Filed with missing or incorrect TINs. |
| 511 | 6721 | Late, Magnetic Media, and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was not: • Correctly and timely filed, • Filed electronically or on magnetic media (after the first 250 forms of each type) required by IRC 6011(e)(2)(a), and • Submitted in the proper format as provided for in either the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 512 | 6721 | Late, Missing or Incorrect TIN, and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was: • Not correctly and timely filed, • Filed with missing or incorrect TINS, and • Not submitted in the proper format as provided for in either the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 513 | 6721 | Magnetic Media, Missing or Incorrect Tins, and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was: • Not filed electronically or on magnetic media, • Filed with missing or incorrect TINs , and • Not submitted in the proper format as provided for in either the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 514 | 6721 | Late, Magnetic Media, Missing or Incorrect TIN and Improper Format Penalty A penalty is charged for each Form 1098, 1099, W-2 or W-2G that was: Not correctly and timely filed electronically or on magnetic media • Filed with missing or incorrect TINs, and • Not submitted in the proper format as provided for in either the IRC, Treasury Regulations, or Social Security Administration procedures. |
| 549 | 6721 (e) | Penalty in the Case of Intentional Disregard The penalty is assessed at $100 per failure to file Form W-2. • A penalty is charged for each Form W-2 that was not filed as required by IRC section 6051. |
| RN | IRC section | Description | ||
|---|---|---|---|---|
| 600 | 6721 | Failure to File Correct Information Returns. | ||
| ♦ | This reference number should only be used for returns and statements due after December 31, 1989. | |||
| ♦ | $50 per failure/maximum $250,000. | |||
| ♦ | $15 per failure/maximum $75,000. If a failure is corrected within 30 days, after the due date of the information return, the penalty will be decreased to $15 per failure. The maximum annual penalty per filer shall not exceed $75,000. | |||
| ♦ | $30 per failure/maximum $150,000. If the failure is corrected more than 30 days after the due date of the return, but on or before August 1st of the filing year, the penalty will be decreased to $30 per failure. The maximum annual penalty per filer shall not exceed $150,000. | |||
| ♦ | For other circumstances that may apply, see IRM 20.1.10. | |||
| 601 | 6723 | Failure to Include Correct Information. | ||
| ♦ | This reference number should only be used for return periods beginning after December 31, 1985 and ending prior to January 1, 1990. | |||
| ♦ | $5 per failure, with a maximum not to exceed $20,000. | |||
| 602-606 | 6676 | Failure to Supply Identifying Numbers. | ||
| ♦ | These reference numbers should only be used for returns and statements due prior to January 1, 1990. | |||
| ♦ | These penalties were incorporated into IRC 6721 and 6723. | |||
| 607 | 6721 | Failure to File a Correct Information Return. | ||
| ♦ | This reference number should only be used for returns due after December 31, 1986 and before January 1, 1990. | |||
| 608 | 6721 | Failure to File a Correct Information Return. | ||
| ♦ | This reference number should only be used for Forms 1099 INT, DIV, and PATR returns due after December 31, 1985 and before January 1, 1990. | |||
| 609 | 6721 | Failure to File a Complete Form 8300, Report of Cash Payments Over $10,000. (Detroit Computing Campus) | ||
| 610 | 6722 | Failure to Furnish Correct Payee Statement. | ||
| ♦ | This reference number should only be used for returns due after December 31, 1986 and before January 1, 1990. | |||
| 611 | 6722 | Failure to Furnish Correct Payee Statement. | ||
| ♦ | This reference number should only be used for Forms 1099 INT, DIV, OID, and PATR returns due after December 31, 1986 and before January 1, 1990. | |||
| 612 | 6722 | Failure to Furnish Correct Payee Statement. | ||
| ♦ | For returns required to be filed after December 31, 1989, a penalty will be imposed for each failure to: | |||
| ♦ | furnish a payee statement on or before the due date to the person to whom the statement must be furnished, | |||
| ♦ | furnish all information required, and | |||
| ♦ | furnish correct information. | |||
| ♦ | The $50 penalty for failure to furnish payee statements is not reduced if returns are corrected or filed after the due date. | |||
| ♦ | Only one penalty per statement, regardless of the number of failures per statement. | |||
| ♦ | The total penalty for all such failures during any calendar year shall not exceed $100,000. | |||
| 613 | 6679/6046/6046A | Failure to File Returns, Etc, With Respect to Foreign Corporations or Foreign Partnerships. | ||
| ♦ | Failure to File Form 5471, Schedule O/Form 8865, Schedule P. | |||
| ♦ | The penalty is assessed at $10,000 per failure. | |||
| 614 | 6679/6035 | Failure to File Returns, Etc, With Respect to Foreign Corporations or Foreign Partnerships. | ||
| ♦ | Failure to File Form 5471, Schedule N. | |||
| ♦ | The penalty is assessed at $1,000 per period. | |||
| 615 | 6682 | False Information with Respect to Withholding. | ||
| ♦ | False information on Form W–9. | |||
| ♦ | $500 for each false statement (W–9). | |||
| 616 | 6682 | False Information with Respect to Withholding. | ||
| ♦ | False information on Form W–4. | |||
| ♦ | $500 for each false statement (W–4). | |||
| 617 | 6723 | Failure to Include Correct Information. This reference number should only be used for returns due after December 31, 1986, and before January 1, 1990. | ||
| ♦ | See reference number 647 and 648 for 6723 penalty computation. | |||
| 619 | 6679/6677/6038/6038A | Failure to File Returns with Respect to Foreign Corporations or Foreign Partnerships. | ||
| ♦ | Continued failure to provide information after 90 day period. | |||
| ♦ | The penalty is assessed at $10,000 per 30 day period. | |||
| 620 | 6693 | Failure to Provide Reports on Individual Retirement Accounts or Annuities. | ||
| 6693(b)(1) | Overstatement of Designated Non-deductible Contributions—$100 per overstatement, | |||
| 6693(b)(2) | Failure to File an IRA Form—$50 per failure, | |||
| 621 | 6723 | Failure to Comply with Other Reporting Requirements. | ||
| ♦ | For returns and statements required to be filed after December 31, 1989, | |||
| ♦ | A penalty of $50 per failure | |||
| ♦ | to comply timely with specified information reporting requirements, or | |||
| ♦ | to include correct information. | |||
| ♦ | The maximum penalty is $100,000 per year. | |||
| 623 | 6038 | Failure to Furnish Information with Respect to Certain Foreign Corporations. | ||
| ♦ | Failure to File Form 5471/Form 8865. | |||
| ♦ | $10,000 per annual accounting period plus FTC reduction. | |||
| 625 | 6038A(d) | Information with Respect to Certain Foreign owned Corporations. | ||
| ♦ | failure to furnish information or maintain records as required by IRC 6038A(a) and 6038A(b). Form 5472. | |||
| ♦ | $10,000 for each taxable year with respect to which the failure occurs. If the failure continues for more than 90 days after notice of failure mailed, an additional $10,000 is imposed for each 30-day period during which the failure continues after the expiration of the original 90 day period. | |||
| 630 | 6720/170(f)(12) | Donee's failure to issue acknowledgement on used vehicle donation/AJCA Section 884 | ||
| ♦ | Multiple calculations | |||
| 632 | 6705 | Failure by a Broker to Provide Notice to a Payor. | ||
| ♦ | $500 for each failure. | |||
| 634 | 6707/6111 | Failure to Furnish Information Regarding Tax Shelters | ||
| ♦ | Notices after 1/24/2005 include AJCA 816 provisions. | |||
| ♦ | Multiple calculations. | |||
| 637 | 6676 | Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990. | ||
| ♦ | The penalty was incorporated into IRC section 6723. | |||
| 638 | 6721/6053 | Failure to file Form 8027, Employer's Tip Income Information Report | ||
| ♦ | $50 per failure | |||
| 639 | 6652 | Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990. | ||
| ♦ | The penalty was incorporated into IRC section 6721. | |||
| 640 | 6652 | Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990. | ||
| ♦ | The penalty was incorporated into IRC section 6721. | |||
| 641 | 6652 | Failure to Supply Identifying Numbers. This reference number should only be used for returns due prior to January 1, 1990. | ||
| ♦ | The penalty was incorporated into IRC section 6721. | |||
| 644 | 6706(b) | Failure to furnish information required under Section 1275(c)(2) on debt instrument. | ||
| ♦ | Penalty of 1% of the aggregate issue price of such issue, not to exceed $50,000, unless failure is due to reasonable cause and not willful neglect. | |||
| 647 | 6723 | Failure to Include Correct Information. | ||
| ♦ | This reference number should only be used for returns prepared prior to January 1, 1990. | |||
| ♦ | The penalty was self-assessed at $5 for each return or statement that was reported incorrectly. | |||
| 648 | 6723 | Failure to Include Correct Information. | ||
| ♦ | This reference number should only be used for returns due prior to January 1, 1990. | |||
| ♦ | The penalty was at $5 for each return or statement that was reported incorrectly. | |||
| 649 | 6652(c)(2) | Failure by Exempt Organization or Certain Trusts to file returns required by IRC 6034 or 6043(b). | ||
| ♦ | For any one return, the penalty is assessed at $10 per day, not to exceed $5,000 for all persons for the failure to file any one return. | |||
| 651 | 6721 | Failure to Comply with Certain Information Reporting Requirements—Form 8300. | ||
| ♦ | This penalty applies to returns required to be filed after December 31, 1989. | |||
| ♦ | The penalty is assessed at $50 per Form 8300 not timely and correctly filed. | |||
| 652 | 6721(e) | Intentional Disregard of the Failure to comply with Certain Information Reporting Requirements. | ||
| ♦ | This reference number is used to assess the intentional disregard penalty when the Form 8300 is not timely or correctly filed. | |||
| ♦ | This penalty applies to returns pertaining to amounts received after November 5, 1990. | |||
| ♦ | The penalty is assessed at the greater of: | |||
| ♦ | $25,000, or | |||
| ♦ | the amount of cash received in such transaction, to the extent the cash does not exceed $100,000. | |||
| ♦ | The $250,000 yearly limitation under IRC 6721 shall not apply. | |||
| 653 | 6722 | Failure to Furnish Correct Payee Statements | ||
| ♦ | This penalty applies to payee statements required to be filed after December 31, 1989. | |||
| ♦ | The penalty is assessed at $50 per payee statement not timely furnished or containing incorrect or incomplete information. | |||
| ♦ | The maximum penalty shall not exceed $100,000 per year. | |||
| 654 | 6722(c) | Intentional Disregard of the Requirement to Furnish a Correct Payee Statement—Form 8300. | ||
| ♦ | This penalty applies to payee statements required to be filed after December 31, 1989. | |||
| ♦ | The intentional disregard penalty for failing to provide a payor of cash with a statement as required by IRC sections 6050l(e) after December 31, 1989, is the greater of $100 or 10 percent of the amount required to be reported correctly on the statement. | |||
| ♦ | The $100,000 yearly limitation does not apply. | |||
| 667 | 6725/4101(d) | Failure to Report Under IRC 4101 (AJCA 863 assessable after 7/15/2005). | ||
| ♦ | $10,000 | |||
| 668 | 6039F | Failure to File Form 3520 to Report Receipt of Foreign Gifts | ||
| ♦ | 5% per month, up to 25% | |||
| 669 | 6688/937 | Failure to File Form 8898 Regarding Residence in a US Possession (AJCA 908 assessable after 7/15/2005). | ||
| ♦ | $1,000 | |||
| 670 | 6719/4101 | Failure to Register Under IRC 4101 (AJCA 863 assessable after 7/15/05). | ||
| ♦ | $10,000, plus $1,000 per day | |||
| 671 | 6039G | Failure to File Form 8854 regarding Expatriate/Residency Report (AJCA 804 assessable after 7/15/2005). | ||
| ♦ | $10,000 | |||
| 672 | 6043A/6721 | Failure to File information returns regarding Taxable Mergers and Acquisitions | ||
| ♦ | The penalty is assessed at $50 per failure. | |||
| 673 | 6702 | The refusal to furnish information needed to determine income tax liability on constitutional grounds. | ||
| ♦ | The penalty is assessed at $500 per return. | |||
| 674 | 6723 | Failure to Comply with Other Reporting Requirements. Failure to Provide Notice of Partnership Exchange. | ||
| ♦ | a penalty of $50 is imposed for each failure to comply timely with specified information reporting requirements. | |||
| ♦ | The maximum penalty for failure to comply with all specified information reporting requirements is $100,000 per year. | |||
| 675 | 6722(b) | Failure to Notify Partnership of Exchanged of Partnership Interest. | ||
| ♦ | This penalty applies to statements required to be furnished before January 1, 1990. | |||
| ♦ | The penalty is assessed at $50 per payee statement not timely or correctly furnished. | |||
| 676 | 6038B | Notice of Certain Transfers to Foreign Persons (Failure to File Form 926)(Failure to File Form 8865, Schedule O (Operational after 7/15/2005)) | ||
| ♦ | 10% of the Fair Market Value | |||
| 677 | 6677 | Failure to File Information Returns with Respect to Certain Foreign Trusts. | ||
| ♦ | 5 percent of the amount transferred to a trust, or | |||
| ♦ | 5 percent of the value of the corpus of the trust at the close of the taxable year, but | |||
| ♦ | not more than $1,000. | |||
| 678 | 6039E | Failure to provide Information concerning Residence Status. | ||
| ♦ | $500 for each failure to provide the required information. | |||
| 679 | 6039E | Failure to provide Information concerning Residence Status. (Taxpayer Identification Number). | ||
| ♦ | $500 for each failure to provide the required information. | |||
| 682 | 6707A | Failure to include reportable transaction information (AJCA 811 assessable after 7/15/2005). | ||
| ♦ | $10,000 to $200,000 | |||
| 685 | 6712 | Failure to Disclose Treaty-Based Return Position. | ||
| ♦ | The penalty is assessed at: | |||
| ♦ | $1,000, individual, | |||
| ♦ | $10,000, corporation. | |||
| 686 | 6651(f) | Increase in Penalty for Fraudulent Failure to File | ||
| ♦ | 15 percent per month, | |||
| ♦ | for a maximum of 5 months, | |||
| ♦ | not to exceed 75 percent of the total tax. | |||
| 1. | Entity Information. | |
| 2. | Linked—Indicated a match between the IMF/BMF entities and the PMF entities. | |
| 3. | Filing History: | |
| a. | Indicates if Information Returns were filed in the tax year. | |
| b. | Penalty indicator codes | |
| 4. | Submission Record: | |
| a. | Original transmitted—Paper or magnetic media. | |
| b. | Amended transmitted—Paper or magnetic media. | |
| c. | Replace transmitted magnetic media only. | |
| d. | Number of documents subject to a penalty. | |
| e. | Received date for late filing. | |
| f. | DLN of the Form 1096, MSN of Form W–3. | |
| g. | Total money amount and withholding reported on forms filed. | |
| 5. | Summary: | |
| a. | Total original, amended, replace documents submitted. | |
| b. | Number of documents subject to penalty. | |
| c. | Total amount reported. | |
| d. | Backup withholding. | |
| e. | Waiver and extensions granted. | |
| f. | Summary of penalties by return type. | |
| g. | Dollar amount of penalty assessed. | |
| The TIN Validation process compares the taxpayer identification number (TIN) and name control (the first four characters of a surname or first four characters of the first significant word in a non-individual's title) against certain IRS or Social Security Administration (SSA) files. | |
| • The National Account Profile (NAP)–1 file, a number bank which contains all social security numbers (SSNs) ever issued and all of the name controls ever associated with those SSNs. | |
| • The weekly accretion file, a weekly update to the National Account Profile (NAP)–1 received by SSA. | |
| • The EIN/Name Control file, a file created and maintained by the Service which contains all employer identification numbers (EINs) and the name controls associated with them. | |
| The matching process: | |
| • The Service attempts to match each name and TIN combination provided on all information returns against the three files listed above. | |
| • The first attempt is made against the National Account Profile (NAP)–1 file. If no match is found, an attempt is made against the EIN/Name Control file. | |
| • If the TIN matches, an attempt to match the name control provided is made. | |
| • If the name control is not provided, an attempt to develop name controls is made by creating name controls from each word separated by space on each name line. Both name lines 1 and 2 are read, totaling 80 characters, 40 characters for each name line. | |
| • Extract matches are attempted first, followed by proximal matches. | |
| Extract matches occur when the name/TIN combination provided on the information return exactly matches the name/TIN combination on either file. This applies to both SSNs and EINs. | |
| Proximal matches allow for transposition of the second and third characters of the name control provided. NOTE: THIS APPLIES TO SSNs ONLY. | |