20.1.7  Information Return Penalties (Cont. 1)

20.1.7.2 
Powers of Attorney for Civil Penalties

20.1.7.2.2  (07-15-2011)
Unauthorized Third Party

  1. No tax information can be sent to or discussed with an unauthorized third party.

    1. If the unauthorized third party is requesting authorization to act on behalf of the taxpayer or is requesting information concerning the penalty assessment, notify them by letter that their request cannot be met.

    2. Any further correspondence required should be sent directly to the taxpayer. Include a paragraph in the taxpayer's letter requesting that the taxpayer notify the third party of our direct reply to the taxpayer. See IRM 4.11.55.1.7.2, Form 8821 - Tax Information Authorization, and IRM 4.11.55.1.8.1, Missing or Incorrect Information on Form 2848 or Form 8821.

20.1.7.3  (07-15-2011)
Failure to File Correct Information Returns IRC 6721

  1. For information returns or statements, a penalty may be imposed for filing returns:

    1. After the due date,

    2. Without all required or correct information, (including missing, incorrect and/or not currently issued TINs),

    3. On paper when required to be filed on electronic media,

    4. When filed on paper, in a manner which does not allow them to be processed, or

    5. When filed on electronic media, in a manner which does not allow them to be processed or be read by machine (not processable).

  2. The penalty for information returns is $50 per return with a maximum of $250,000 per calendar year for returns required to be filed before December 31, 2010. The penalty amounts increases to $100 and $1,500,000 respectively for returns required to be filed on or after January 1, 2011, per the SBJA of 2010. This amount is subject to the reductions and limitations outlined in IRC 6721 and IRC 6722.

20.1.7.3.1  (07-15-2011)
Reduction of the Penalty

  1. If a failure is corrected within 30 days after the due date that the information return is required to be filed, the penalty will be decreased to $15 per failure and the maximum annual penalty per filer shall not exceed $75,000 for returns required to be filed by December 31, 2010. The penalty will be decrease to $30 per failure and the maximum penalty amount shall not exceed $250,000 for returns required to be filed by December 31, 2010.

  2. If the failure is corrected more than 30 days after the due date that the information return is required to be filed, but on or before August 1 of the filing year, the penalty will be decreased to $30 per failure and the maximum annual penalty per filer shall not exceed $150,000 for returns required to be filed by December 31, 2010, the penalty is $30 if the failure is corrected within 30 days of the due date of the return. If the failure is corrected after 30 days, the penalty is $100. The penalty will be decreased to $60 per failure and the maximum annual penalty per filer shall not exceed $500,000 for returns required to be filed on or after January 1, 2011.

  3. If the filing meets the de minimus exception, this exception applies only to a limited number of corrected returns filed by August 1 of the filing year.

  4. Form 8300 - If a failure to file correct information returns (for returns required to be filed by December 31, 2010) Form 8300 is corrected within 30 days of the due date of the return, the penalty is decreased to $15. If the failure is corrected after the 30 days, the penalty is $50 per failure. The reduction applicable to the time frame of "after 30 days and on or before August 1st" is not applicable because the Form 8300 does not have a fixed due date.

  5. Small Business Limitation - If the filer's average annual gross receipts for the three most recent taxable years do not exceed $5,000,000, the maximum penalty in each of the three penalty categories will be reduced. See IRC 448(c)(3)(C) when computing the average gross receipts test.

    1. For example, if the filer uses a calendar year for tax purposes, and the calendar year the return is required to be filed is 2011, then, the most recent three taxable years would be 2010, 2009, and 2008.

    2. The total maximum for information return penalties, that can be assessed against one filer for all failures corrected within 30 days of the due date of the information return ($15 per failure) shall not exceed $25,000 during any calendar year for returns required to be filed by December 31, 2010. For returns required to be filed by December 31, 2010 the penalty amount increases to $30 per failure not to exceed $75,000 during any calendar year.

    3. The total maximum for information return penalties assessed against one filer for all failures corrected more than 30 days after the due date of the return, but on or before August 1 of the year the return was required to be filed, ($30 per failure) shall not exceed $50,000 during any calendar year for returns required to be filed by December 31, 2010. For returns required to be filed on or after January 1, 2011 the penalty amount increases to $60 per failure not to exceed $200,000 during any calendar year.

    4. The total maximum information return penalty assessed against one filer at $50 per failure may not exceed $100,000 for small businesses for all failures during any calendar years prior to January 1, 2011. The total maximum information return penalty assessed against one filer at $100 per failure may not exceed $500,000 for calendar years after December 31, 2010.

20.1.7.3.2  (07-15-2011)
Intentional Disregard of Rules and Regulations

  1. 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 6721.

  2. 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:

    1. Was required to file,

    2. Knew or should have known of the requirement to file, and

    3. Consciously chose not to file or recklessly disregarded (i.e., ignored) the duty to file the information return.

  3. Treas. Reg 301.67211(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.

  4. 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 IRS, and

    • Did the filer avoid an administrative inconvenience or was the cost of compliance greater than an IRC 6721 penalty?

  5. For instance, intentional disregard may exist when it would be less expensive for the filer to pay the penalties under IRC 6721 rather than to comply with the filing requirements of Treas. Reg. 301.6721-1(f)(3)(i).

  6. The Intentional Disregard of the Rules and Regulations penalty is $100 for each information return required to be correctly filed, or if greater:

    1. 10 percent of the total amount required to be reported on the information returns for dividends, patronage dividends, interest, fishing boat operators, royalties, and wage and tax statement, or

    2. 5 percent of the total amount required to be reported on the information returns for brokers, exchange of partnership interest, or disposition of donated property payments.

      Note:

      The penalty amount increases to $250 for returns required to be filed on or after January 1, 2011.

  7. Form 8300 -The intentional disregard penalty for failing to file a correct Form 8300 under IRC 6050I(a) is the greater of: See IRM 4.26.11.4.6.2

    1. $25,000, or

    2. The amount of cash required to be reported in the transaction up to $100,000.

      The penalty applies to cash amounts exceeding $10,000 received by a trade or business (as defined by IRC 162).

      The information required to be provided by the recipient of the cash includes: the name, address, and TIN of the person providing the cash; the amount of cash received; and the date and nature of the transaction.

      The Form 8300 is required to be filed within 15 days of the receipt of the reportable amount.

    Note:

    The intentional disregard penalty on Form 8300 is subject to a pre-assessment administrative appeal. Generally this penalty will only be assessed as a result of an area office examination. See IRM 4.26.10.11, Penalties, for guidance on penalty applicability.

  8. There is no maximum dollar limitation for the Intentional Disregard of the Rules and Regulations Penalty.

  9. No more than one penalty per return can be imposed even if there is more than one failure on the same information return. However, where a return is filed with multiple failures and the penalty amounts differ, the higher penalty will be imposed.

    Example:

    Only one penalty may be imposed on a return that is filed both late and incomplete. If the failure to provide the information is due to intentional disregard, but the late filing is not, the intentional disregard penalty should be imposed.

20.1.7.3.3  (07-15-2011)
Exceptions and Special Rules

  1. The "de minimus" exception may apply to the number of incorrect information returns remaining after the reasonable cause waiver has been allowed, see (2) below. The de minimus exception may apply if the return:

    1. Was filed,

    2. Had missing or incomplete information, and

    3. The filer supplied the missing or incomplete information on or before August 1st of the filing year.

  2. The maximum number of corrected information returns to which this exception applies cannot exceed the greater of: 10, or one-half of one percent of the total number of returns required to be filed during that calendar year. This exception only applies to returns that were due on February 28th or March 15th (March 31 for electronic filers).

  3. The penalty shall not be assessed for errors or omissions that are considered inconsequential.

  4. The term "inconsequential" means any failure that does not make it difficult for or prevent the IRS from:

    1. Processing the return,

    2. Matching the information return shown with the payee's tax return, or

    3. Otherwise putting the information return to its intended use.

  5. Errors or omissions are never considered inconsequential if they relate to:

    • A taxpayer identification number,

    • A surname of a payee, and/or

    • Any monetary amount.

  6. 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.

20.1.7.3.4  (07-15-2011)
Failure to Timely File Information Returns

  1. These procedures are used to identify late filed paper returns received by the Submission Processing Campus during the current processing year:

    1. The delinquent Form 1096 is date stamped by Receipt and Control. A delinquent indicator "X" , will be marked in the first box under the title "For Official Use Only."

    2. Operators will key in the received date from the date stamp whenever the "X" is present and the information returns will be processed to the PMF.

    3. These procedures will ensure that this information will update PMF.

  2. If the submission is all original, or mixed original and corrected returns, follow the procedures below as appropriate.

  3. If the filer's explanation meets reasonable cause and no penalty will be assessed, with managerial approval take the following actions:

    1. Circle out or line through the date stamp,

    2. Ensure that the first box on the Form 1096 under the title "For Official Use Only" is not marked with an "X" ,

    3. Annotate on the Form 1096"Reasonable cause established " (see "d" below) in an area that is not scanned,

    4. NOTE: Beginning with processing year 1995, no markings of any kind may be entered in the top margin of Form 1096. Markings in this area would interfere with processing these documents under the SCRIPS processing system. Use care when circling out date stamps to avoid marking the top margin.

    5. "Reasonable cause established" must be written in either the bottom margin of Form 1096 or in the white space between the two columns of instructions at the bottom of the form,

    6. Using CC "REQ54" file the correspondence and a copy of the Form 1096 as source documents,

    7. Send the filer Letter 1948-C explaining the determination, and

    8. Forward the Form 1096 and associated returns for normal processing.

  4. If the filer's explanation does not meet reasonable cause and the determination is to allow the PMF to generate a penalty proposal for late filing, follow the instructions below:

    1. Place delinquent indicator "X" in the first box on the Form 1096 under the title "For Official Use Only,"

    2. Create a case file containing a copy of the transmittal, postmarked material (if available), and the taxpayer's correspondence,

    3. Send the filer Letter 0854(C) explaining the determination, and

    4. Forward the Form 1096 and associated returns for normal processing.

  5. Do not identify returns filed by federal agencies for the penalty.

  6. Do not allow the penalty to be assessed if it can be determined that Form 1099-DIV reported liquidation distributions or were distributed under IRC 404(k) for an employee stock ownership plan (ESOP).

  7. ECC-MTB will enter the received date and provide postmarked material for late filed returns filed on /electronic media to allow the PMF to automatically generate the penalty proposal for late filing. The notice will generate unless the filer was granted an extension of time to file.

    1. The Form 4419 is date stamped by ECC-MTB for late filed returns.

    2. When a filer requests an explanation of the penalty assessment or disputes the penalty, the transmittal documents must be requested from ECC-MTB so that a copy can be sent to the filer.

    3. If the payer uses the U.S. Postal Service to ship the data to ECC-MTB, the postmark is retained and sent to the Campus to validate a received date.

  8. If a correction is being submitted for a name or TIN change, the filer will submit two returns to make the correction.

    1. One correction with "zero" money amounts, and

    2. One original return to replace the first return filed

  9. Campuses should attempt to identify this situation and ensure that the penalty is not assessed for the "replacement" return (original), since it is part of a correction.

  10. See the Instructions to Filers of Form 1098, Form 1099, Form 5498, Form W-2 and Form W-2G for additional information on the procedure for filing name/TIN corrections for paper returns.

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20.1.7.3.4.1  (07-15-2011)
Late Filing Penalty (Prior Year Returns)

  1. 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 2011, this would apply to returns filed for tax years 2009 and prior. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. 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 the Notice 972CG.

  3. Receipt and Control will forward these returns to the area responsible for assessing the IRP penalties. ECC-MTB will also forward Form 4419 for assessment of the late filing penalty for returns filed electronically and provide the received date.

  4. Do not assess any penalties on Form 1096 if the following conditions are present:

    1. 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 Form 1096 secured by Examination and a "C" in this box for forms secured by Collection.

    2. A Form 1096"N" coded on the top the form indicates that penalties were considered by Receipt and Control.

    3. If any of these conditions exist, notate "Penalty Considered" (if not present) and forward the Form 1096 and associated returns to the IRP unit in Receipt and Control for processing.

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  5. If the returns were submitted with an explanation for the late filing, consider reasonable cause as appropriate. If 11 or more returns are received with an explanation or the explanation does not meet reasonable cause, assess the penalty.

    1. Count the returns to ensure no void or blank forms are included,

    2. Exclude returns not required to be filed based on the dollar amount reported or that are otherwise exempted from the penalty, and

    3. If the number of returns subject to penalty falls below 11 after the count and any exclusions, do not assess the penalty.

  6. If the filer's explanation establishes reasonable cause and the penalty will not be assessed, with managerial approval, take the following actions:

    1. Using CC "REQ54" file the correspondence and a copy of the Form 1096 as source documents.

    2. Send the filer Letter 1948C, Civil Penalty Explained, explaining the determination.

    3. 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.

    4. Annotate on the Form 1096"Reasonable Cause Established" and forward to the IRP unit in Receipt and Control for processing. Note: Only the three 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.


    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡


    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "

  7. If the filer's explanation does not establish reasonable cause and the penalty will be assessed, take the following actions:

    1. Research using IDRS to ensure that the maximum has not been reached before assessing any further penalties.

    2. Use Penalty Reference Number 500 to make assessments for late filed information returns.

    3. Create a case file containing a copy of the Form 1096 and Form 1099, or Form 4419, Application for Filing Information Returns Electronically (FIRE) and any postmarked material (if sent from ECC-MTB).

    4. 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.

    5. Forward the case file to Files for association with the adjustment document.

  8. Do not assess penalties against any federal agency.

20.1.7.3.4.2  (07-15-2011)
Late Filing Penalty - Forms W-2

  1. A late filed Form W-2 is identified by the Social Security Administration (SSA). This information is posted to the Payer Master File (PMF) for the penalty program. The late filing penalty will be assessed at $15, $30, or $50 per failure for returns required to be filed by December 31, 2010, on late-tier indicators provided by SSA. The penalty amounts increases to $30, $60, or $100 per failures for returns required to be filed on after January 1, 2011.

    1. $15 ($30),

    2. $30 ($60), or

    3. $50 ($100).


    The indicator is derived from the received date. Indicators will appear in the "Late SSA" field on the PMF transcript.

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Only Forms W-2 and Forms W-3 that are included in the Notice 972CG (i.e., waiver or extension granted) will appear on the PMF. Other Forms W-2 and Forms W-3 submitted by employers are currently not posted to the PMF. These may be researched using CC "BMFOLU" , if necessary.

    2. Extensions and waivers for Form W-2 that have been approved and meet penalty criteria will post to PMF, even if the forms are not subject to a penalty.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " .

  3. SSA will date stamp Form W-2/ Form W-3 transmittals for delinquent Forms W-2 filed on paper.

20.1.7.3.4.3  (07-15-2011)
Receiving Responses (Failure to Timely File)

  1. Generally, filers must establish reasonable cause for the penalty to be abated.

  2. If the filer requests a copy of the Form 1096 that resulted in the penalty, request a microfilm print of the Form 1096 and send it to the filer. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. Filers may request copies of transmittal Form 4419 submitted with Form 1099, filed electronically. The documents may be needed to answer the filer's question about the penalty assessment.

    1. The Campus must contact ECC-MTB IRB to request date stamped copies of these forms for late filed electronic returns.

      Note:

      ECC-MTB will continue to provide Forms 4419 in advance for the Campus to make certain manual assessments.

    2. ECC-MTB IRB 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.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. Written requests should be submitted to ECC-MTB IRB using Form 3210. ECC-MTB will also accept requests by fax.

    5. Campus sites should batch their requests and submit them to ECC-MTB IRB no more than once a week except in extreme cases.

    6. Campus sites should use their established ECC-MTB IRB contact points to coordinate requests by mail or fax .

    7. To prevent unauthorized disclosures, sanitize Form 4419 to exclude all other filers' data before being mailed to the filer. This does not apply to the "transmitter" information on Form 4419.

    8. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  5. If the filer requests a copy of Form W-3, send a photocopy to the filer. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. If the filer requests a copy of Form W-2 filed on paper or if copies of Form 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 Form W-2 filed electronically. Beginning in 2009 all WIRS request need to be made via ORS. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. Campus sites 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.

    2. Campus sites must ensure that the information on the paperwork applies only to the employer in question to prevent an unauthorized disclosure.

  7. Returns (Form 1099) filed electronically with unprocessable conditions are returned to the filer by ECC-MTB IRB for corrections.

  8. When a correction is required to change the return type, e.g. a return originally filed as Form 1099-INT income was actually Form 1099-DIV income, the filer must file two returns to make the correction.

    1. A corrected Form 1099-INT return is filed (with zero money amounts) to zero out the original Form 1099-INT return, and

    2. A replacement Form 1099-DIV return is filed as an original return.

  9. 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.

    1. However, if a filer responds with an approval letter from ECC-MTB IRB granting an extension, check to see if the filer's TIN appears on the extension listing provided by ECC-MTB IRB.

    2. If present, the penalty should be abated.

  10. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  11. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    Note:

    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  12. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  13. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  14. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  15. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  16. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  17. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  18. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

20.1.7.3.4.4  (07-15-2011)
Responses to Combined Annual Wage Reporting (CAWR)

  1. The IRS assesses penalties for cases referred by the Social Security Administration (SSA) when there is a discrepancy between wages reported on Form W-2 and what is reported to the IRS on Form 941 and Form 944. 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 IRS.

    • An SSA discrepancy is identified when the employer reports more Social Security Wages to the IRS than to SSA.

    • An SSA discrepancy is resolved when the employer files missing Form W-2, files Form W-2c, reports adjustments to their Form 94X (Form 941X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund, process) or submits other information to resolve the discrepancy.

    Upon receipt of these cases, please refer to CAWR IRM 4.19.4, Liability Determination - CAWR Reconciliation Balancing.

  2. Penalty Assessment - If the discrepancy is not resolved by filing missing Form W-2, filing Form W-2c, reporting adjustments to Form 94X ( Form 941X process), or providing an explanation of the discrepancy, the IRS is directed to assess a penalty. Please follow instructions provided by IRM 4.19.4 for referring to CAWR Unit.

20.1.7.3.4.5  (07-15-2011)
Penalty for Failure to File on Electronic Media

  1. The Payer Master File (PMF) generates a penalty proposal notice when a filer fails to comply with the electronic media filing requirements for information returns. Failure to file in the required manner, i.e., on electronically machine-readable form as provided under IRC 6011(e) and the regulations there under will result in a penalty.

  2. Per Treas. Regs. 301.6011-2: The Commissioner may waive the requirements of IRC 6011(e) if hardship is shown in a request for waiver. The principal factor in determining hardship will be the amount, if any, by which the cost of filing the information returns in accordance with this section exceeds the cost of filing the returns on other media. A request for waiver should be filed at least 45 days before the due date of the information return in order for the Service to have adequate time to respond to the request for waiver. The waiver will specify the type of information return and the period to which it applies and will be subject to such terms and conditions regarding the method of reporting as may be prescribed by the Commissioner.
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. A penalty of $50 per return is proposed for each return filed on paper before January 1, 2011 in excess of the electronic threshold. The penalty amount increases to $100 per returns for returns required to be filed on or after January 1, 2011. 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 IRB and posted to the PMF.

20.1.7.3.4.6  (07-15-2011)
Receiving Responses

  1. Filers may avoid a penalty by establishing reasonable cause for the failure. See IRM 20.1.7.8 and IRM 20.1.1, Penalty Handbook - Introduction and Penalty Relief, for definitions of reasonable cause and special abatement conditions.

  2. All current year electronic penalty cases are compared to the waivers of the electronic media filing requirement that post to the PMF prior to the generation of penalty notices.

    1. If a filer responds with an approval letter from ECC-MTB IRB granting a waiver of the electronic filing requirement, check to see if the filer's TIN appears on the waiver listing provided by ECC-MTB IRB. If present, the penalty should be abated using the correct Penalty Reason Code (PRC).

    2. If the TIN is not on the waiver listing, further explanation is required.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  3. If the taxpayer's response indicates that duplicate data was provided on paper and on electronic media:

    1. First attempt to verify using the PMF transcript or CC "PMFOL" and any supporting documentation sent by the filer.

    2. If no supporting documentation is found on the PMF transcript or CC "PMFOL" , contact ECC-MTB IRB 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.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  4. If the filer requests a copy of the Form 1096 that resulted in the assessment on paper Form 1098/ Form 1099, request a SCRIPS print of the Form 1096 and send it to the filer. The DLN of the Form 1096 can be found on the PMF transcript and on CC "PMFOLD" .

  5. If the SCRIPS print of Form 1096 is not available after research, sanitize the page(s) of the PMF transcript containing the Form 1096 record(s) relevant to the penalty and send the filer a copy with an explanation.

  6. If the filer requests a copy of the Form W-3 that resulted in the assessment on paper Forms W-2 send a photocopy to the filer.

    1. If the Form W-3 is not available, sanitize the page(s) of the PMF transcript containing the Form W-3 record(s) relevant to the penalty and send the filer a copy with an explanation.

    2. Do not submit a request to WIRS for copies of the Form W-3.

  7. If the filer requests a copy of the Form W-2 that resulted in the assessment, request the document from WIRS using the microfilm sequence number(s) provided on the PMF transcript. Indicate Form W-3 and all Forms W-2 in the remarks area.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    1. When the Form 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).

    2. 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.

    3. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  8. The following information will be useful when working responses to Form W-2 electronic penalty cases.

    1. If the filer questions why the number of Forms W-2 penalized does not agree with the volume entered on Form W-3 by the filer, explain that the penalty is based on the actual number of returns 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.

    2. If the response indicates that only 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 Form W-3 is a record of the paper forms filed with SSA.

    3. If the filer used a prior year Form W-3, check the signature date to determine what year the returns were submitted (this is consider a document filed in a improper format). ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    6. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

20.1.7.3.4.7  (07-15-2011)
Penalty for Failure to File in the Proper Format (Unprocessable Returns)

  1. 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 IRB. This penalty is manually assessed by the Campus (CP 215 or CP 15 Notices). It is not preceded by a Notice 972CG.

    1. 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.

    2. 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.

    3. 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.

    4. The penalty will be assessed at $50 per return for returns filed prior to January 1, 2011 and is computed by multiplying the number of unprocessable returns by $50. The penalty amount increases to $100 per return for returns required to be filed on or after January 1, 2011. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ The de minimus exception does not apply to the improper format penalty.

  2. The SP correspondence unit will receive copies and unsatisfactory responses to Letter 1865C, Information Return (Paper) Incomplete for Processing/Instructions Enclosed: Form 1098, 1099, etc., 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.

  3. ECC-MTB IRB will refer Form 4419, Transmittal of Information Returns Reported Magnetically/Electronically, 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 IRB or if the file was returned but was still unprocessable at the end of the processing year.

  4. ECC-MTB IRB will refer to the Campus IRP Penalty Unit any unresolved, unreturned solicitations for corrected electronic media (ECC-MTB IRB will purge the case and upon nonreceipt will notify the Campus of the DLN). The Campus will send a CP 215/CP 15 Notice to the submitter assessing the proposed penalty amounts. Any corrected tapes will be submitted to ECC-MTB IRB from the Campus asking for input as to the correctness of the assessment.

  5. 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.≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. Prior to assessing the penalty for unprocessable electronic media returns (Form 4419), check IDRS for the presence of a late filing or electronic media penalty assessed for the same number of returns filed on paper.

    1. If an assessment is present, request a PMF transcript for manual assessments to determine if the penalty is for the same returns.

    2. If confirmed, notate the date and "Penalty Considered" on the Form 4419, associate with the closed case and refile.

    3. If it is determined that the previous assessment is for different returns, assess the penalty based on the information on Form 4419/ Form 4802.

  7. Only the actual returns that 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.

    1. Any processable returns will have been input with original Form 1096.

    2. The unprocessable returns will be forwarded to the IRP 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.

    3. 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.

    4. ECC-MTB IRB will count the entire submission as unprocessable and, if the number of documents cannot be discerned, will propose the maximum penalty. Prior year submissions will also be considered.

    If returns are received from Receipt and Control that are processable, return the entire submission to the IRP Unit in Receipt and Control with an explanation.

  8. The penalty is to be assessed on the Civil Penalty Module.

    1. If the unprocessable returns were also filed late the first time they were filed, check CC "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 penalty reference number 503. If an extension was not granted, use penalty reference number 506.

    2. If a sufficient number of returns was submitted to require electronic media filing, check CC "PMFOL" to see if a waiver was granted for the return type and tax year in question. If an electronic waiver was also granted, use penalty reference number 503. If a waiver was not granted, use penalty reference number 508.

    3. If the returns were filed late and the volume was large enough to require electronic filing, check for the extension and waiver. If both were granted, use penalty reference number 503. If neither was granted, use penalty 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. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

      Note:

      ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  9. 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 ($100) per return, but it will be reduced if the corrected forms are submitted on or before August 1, 20XX.

  10. Processable returns (paper) resubmitted after the date requested in Letter 1865C should be processed unless the penalty amount is less than $5000 (10 submissions calculated at $50 per submission).

  11. 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 the taxpayer.

20.1.7.3.4.8  (07-15-2011)
Receiving Responses (Unprocessable Returns)

  1. Generally filers must establish reasonable cause for the penalty to be abated. See IRM 20.1.7.8.1 for definitions of reasonable cause and IRM 20.1.7.8.2.7 for the special abatement conditions.

  2. If the filer submits corrected returns in response to the penalty notice, Receipt and Control will notate on the CP 215/CP 15 Notice "Processable returns submitted" and also notate the received date and the number of returns submitted.

    1. Review the filer's response to determine if the explanation establishes reasonable cause.

    2. If the filer's explanation does not establish reasonable cause, and the received date indicates that the $50 ($100) penalty should be reduced, recalculate the penalty at $15 ($30) or $30 ($60) per return as appropriate. The penalty should only be adjusted for the number of processable returns received as noted on the CP 215/CP 15 Notice. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    3. Also include the following explanation: We received your corrected information returns on MMDDYYYYY. The penalty you were previously assessed for filing unprocessable Forms XXXX has been reduced to $XX.XX per return. You will receive an adjusted balance due notice.

  3. If the filer submits processable returns in response to the notice, but the explanation provided does not meet reasonable cause, disallow the claim.

20.1.7.3.4.9  (07-15-2011)
Penalty for Missing and Incorrect TINs

  1. Filers who file an information return with a missing TIN, or a TIN determined to be incorrect or not currently issued by the IRS, are subject to a penalty of $50 per return for returns required to be filed by December 31, 2010. The penalty amount increases to $100 per returns for returns required to be filed on or after January 1, 2011.

  2. 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 (PMF) for inclusion in the penalty proposal notice.

    Note:

    When a TIN is identified as incorrect, either the TIN or name may be incorrect.

  3. A paper or CD/DVD 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.

  4. 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.

  5. 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.

  6. 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.

  7. 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.

20.1.7.3.4.9.1  (07-15-2011)
TIN Validation

  1. 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.

  2. During the weekly matching process, the IRS attempts to match each name and TIN combination provided on all information returns.

    IF THEN
    No match is found, an attempt is made against the EIN/Name Control file.
    The TIN matches, an attempt to match the name control provided is made.
    The name control is not provided, an attempt to develop name controls is made by creating name controls from each word separated by a space on each name line.
    Both name lines 1 and 2 are read, totaling 80 characters, 40 characters for each name line.

  3. "Extract matches" are attempted first, followed by "proximal matches."

    1. 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.

    2. Proximal matches allow for transposition of the second and third characters of the name control provided.

      Note:

      THIS APPLIES TO SSNs ONLY.

20.1.7.3.4.10  (07-15-2011)
Receiving Responses for Missing and Incorrect TINs

  1. See IRM 20.1.7.8.2 for the general solicitation requirements for TINs and the general reasonable cause criteria to determine if the penalty should be waived or abated.

  2. Also see IRM 20.1.7.8.2.7 for the special abatement criteria.

  3. 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 Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs (including instructions for reading CD/DVDs and Magnetic Media).

  4. 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.

  5. 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.

  6. If the filer submits examples of garbled information on the TIN listing, apologize for the inconvenience and advise that no action is necessary.

  7. Filers must compare the listings of incorrect and/or not currently issued TINs received from the IRS with their records to determine if the name/TIN combination included on the listings agrees or disagrees with their records.

  8. 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.

  9. If the name/TIN combination on the listing agrees with their records, the filer must perform the required annual solicitation if not completed previously.

  10. If the name/TIN combination on the listing disagrees with its records, the filer must determine whether:

    1. 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 W2-c, Corrected Wage and Tax Statement, even if the employer is only filing Form W-2c to correct an employee's SSN.

    2. If the information in their records has changed since filing the information return, the filer must include that information on any future information returns.

    3. If the IRS changed the information during processing, the filer should notate this on their records and take no further action.

    4. In all the instances outlined above, the filer should notate on their records and provide this information in their reply to the Notice 972CG.

20.1.7.3.4.11  (07-15-2011)
Notice 972CG, Notice of Proposed Civil Penalty

  1. 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 electronic media, and/or for missing and incorrect TINs. Notice 972CG is assigned the penalty reference number that best corresponds to the penalty proposed, e.g. penalty reference number 500 for the failure to file timely penalty.

  2. Filers are allowed 45 days to respond to the notice (60 days if overseas) 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 IRS 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 of penalty relief consideration.

  3. 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.

  4. The Notice 972CG is not posted to the Master File or shown on any IDRS or CFOL Command Codes. Campus sites may open an IDRS control base on MFT 13 or 55 after mailing the notices or 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 "NOTICE972CG" or "972CGREPLY" in the ACTIVITY and OTHER as the category code (Special Category Code CVPN should be established for these cases).

  5. Campus sites should maintain a suspense file for the Notice 972CG, which contains the:

    • Notice,

    • TIN listing (if applicable),

    • CP 215A/CP 15A, Summary of Your 20XX Information Return Penalties,

      Note:

      These file should be maintained in TIN order. Files should be maintained for a minimum of 180 days.

20.1.7.3.4.11.1  (07-15-2011)
Receiving Responses to Notice 972CG

  1. 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 CP 215/CP 15. See the appropriate section in IRM 20.1.7.3 to respond to replies for penalties proposed for late filing, electronic media, and missing/incorrect TINs.

  2. See IRM 20.1.7.8.1 for reasonable cause criteria and IRM 20.1.7.8.2.7 for special abatement conditions.

  3. Filers may be granted an extension for up 30 days to respond to the notice. For notices that were initially undeliverable, or require a recreate (see IRM 20.1.7.1.6.3.5), the new notice date is the date stamped when the notice is mailed a second time.

  4. 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.

  5. If the explanation establishes reasonable cause:

    1. Send Letter 1948C explaining the decision.

    2. Input a TC 290.00 on MFT 13, using Blocking Series 15 for BMF accounts or on MFT 55 using BS 05 for IMF accounts.

    3. Use Reason Code (RC) 062 and/or the appropriate 4th position Penalty Reason Code, Hold Code (HC) 3, PRN from the Notice 972CG and amount 0.00.

    4. File Notice 972CG, correspondence, and a print of the Letter 1948C with your adjustment document.

  6. If the filer agrees with part of the penalty and establishes reasonable cause for the remainder (reasonable cause not denied for any amounts) take the following actions:

    1. Send Letter 1948C explaining the decision, an explanation of how to avoid future penalties, and also explain that the balance due notice will follow (if not paid in full). Use Reason Code 062 and the appropriate penalty reason code.

    2. Input the assessment on MFT 13 or 55 for the agreed penalty amount using BS 52 if it is a first assessment on the module, or BS 53 if a previous adjustment is present.

    3. Use Reason Code 062 and/or the appropriate 4th position penalty reason code for the amount being waived, HC 3, PRN from Notice 972CG, and penalty amount for the part of the penalty being assessed.

    4. Monitor the assessment to ensure that it posts.

  7. If the explanation does not establish reasonable cause or the abatement request is partially denied take the following actions:

    1. Input the assessment for any penalty amount for which the filer did not provide an acceptable explanation.

    2. Use Hold Code 0.

      Reminder:

      Do not use Reason Code 062 if the penalty is being assessed in full.

    3. 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 Notice 972CG.

    4. Input a separate transaction using TC 290, 0, BS 98, RC 062 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.

    5. Send Letter 0854C stating the reason(s) the explanation was not accepted. Also state the penalty amount assessed and explain that a balance due notice will follow. Correspondence should only be sent to the responsible individual and not to a joint account.

    6. File the case.

    7. Monitor the assessments to ensure that they post.

    8. See IRM 20.1.7.3.4.11.1.1, Taxpayer No Longer in Business or Change in Business Organization, 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 at IRM 20.1.7.3.4.11.1.1 applies.

  8. Use care when adjusting penalty amounts when two or more penalties (late, electronic 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 the 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 CP 215/CP 15 Notice. In this example, the dollar amounts should be increased by the penalty amounts as amended by the SBJA of 2010 for returns required to be filed on or after January 1, 2011.

  9. 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.

  10. 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.

  11. See IRM 20.1.7.1 for purge dates.

20.1.7.3.4.11.1.1  (07-15-2011)
Taxpayer No Longer in Business or Change in Business Organization

  1. When a filer is no longer in business or there was a change in business organization, i.e. partnership to corporation, additional steps must be taken. Prior to assessing the penalty, check for undeliverable notices, no response cases, and account freezes. Use BMFOL to check Form 941 (MFT 01) modules for the presence of Collection Compliance transaction.

    1. TC 530 with Closing Code (CC) 10 (defunct corporation).

    2. TC 530 with CC 07 (bankrupt/insolvent corporation). See IRM 20.1.7.8.2.7 for more information on bankruptcies.

      Note:

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    3. TC 480/7890 Offer in Compromise/Pending OIC.

  2. 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.

  3. A TC 480 may be reversed with:

    1. TC 481 - OIC requested,

    2. TC 482 - OIC withdrawn, or

    3. 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.

  4. If Freeze Code -Z is on the account, send the case to Criminal Investigation. Do not assess the penalty.

20.1.7.4  (07-15-2011)
Failure to Furnish Correct Payee Statements IRC 6722

  1. IRC 6722 provides for a penalty when a payee statement is not timely or correctly furnished. The $50 ($100 as amended by the SBJA of 2010 for returns required to be filed on or after January 1, 2011) penalty is imposed for each failure to:

    1. Furnish a payee statement on or before the due date to the person to whom the statement must be furnished,

    2. Furnish all information required, and

    3. Furnish correct information.

  2. No more than one penalty will be imposed per payee statement, even though a statement may contain more than one failure.

  3. For purposes of IRC 6722, the term "payee statement" means any statement required to be furnished as described in Treas. Reg. 301.6721-1(d)(2).

  4. The total amount imposed on any filer for all failures to furnish a payee statement during any calendar year shall not exceed $100,000 ($1,500,000 as amended by the SBJA of 2010 for returns required to be required to be filed on or after January 1, 2011).

  5. 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.

  6. This statement must be on a form acceptable to the IRS. 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.

  7. For returns required to be filed by December 31, 2010, the $50 (the penalty was amended by the SBJA of 2010 for returns due on or after January 1, 2011) and there is a reduction if the failure is corrected within a specified period. The penalty is adjusted for failure to furnish payee statements is not reduced if returns are corrected or filed after the due date.

  8. The IRC 6722 penalty should not be imposed if an error or omission is inconsequential. See IRM 20.1.7.1.

20.1.7.4.1  (07-15-2011)
Intentional Disregard

  1. 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 6722.

  2. 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:

    1. Was required to provide a statement,

    2. Knew or should have known of the requirement to provide the statement, and

    3. Consciously chose not to provide the statement or recklessly disregarded (i.e., ignored) the duty to provide the statement.

  3. 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:

    1. Did the filer correct the failure promptly after the discovery of the failure,

    2. Did the filer correct the failure within thirty days after notification of the failure by the IRS,

    3. Did the filer avoid an administrative inconvenience, and

    4. Was the cost of compliance greater than the IRC 6722(a) penalty?

  4. Intentional disregard may exist when it would be less expensive to pay the penalty under IRC 6722(a) rather than comply with the requirement to provide a statement (Treas. Reg. 301.6721-1(f)(3)(iv)). Check payee's prior history of compliance to determine intentional disregard.

  5. The Intentional Disregard of the Rules and Regulations Penalty is $100 ($250 for returns required to be filed on or after January 1, 2011) for each payee statement required to be filed, or if greater:

    1. Ten 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 statements, or

    2. Five percent of the amount required to be reported on the payee statements for brokers, exchange of partnership interest, or disposition of donated property payments.

  6. Form 8300 Penalty - The intentional disregard penalty for failing to provide a payor of cash with a statement as required by IRC 6050I(e) is the greater of $100 ($250 for returns filed on or after January 1, 2010) or 10 percent of the amount required to be provided on the statement.

    1. These penalties are asserted by field examination personnel.

    2. The taxpayer may be offered an administrative pre-assessment appeal.

  7. There is no maximum dollar limitation for the Intentional Disregard of the Rules and Regulations Penalty under IRC 6722.

  8. No more than one penalty per failure can be imposed, even if there is more than one failure on the same statement.

20.1.7.4.2  (07-15-2011)
Exceptions and Special Rules

  1. 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:

    1. The timely receipt of correct information, or

    2. The payee from putting the information to its intended use.

  2. Errors or omissions are never considered inconsequential if they relate to:

    1. A dollar amount,

    2. A significant item in the payee address,

    3. Use of the appropriate form for the information provided, whether or not it is an acceptable substitute for the official IRS form, and/or

    4. The delivery of the information return to the payee either in person or by first class mail (in a mailer that alerts the payee that the statement is enclosed) under the following: IRC 6042(c), Returns Regarding Payments of Dividends and Corporate Earnings and Profits,IRC 6044(e), Returns Regarding Payments of Patronage Dividends,IRC 6049(c), Returns Regarding Payments of Interest, and/or IRC 6050N(b), Returns Regarding Payments of Royalties.

20.1.7.5  (07-15-2011)
Failure to Comply with Other Information Reporting Requirements IRC 6723

  1. 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 under IRC 6723.

  2. Generally, 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. See exception below at IRM 20.1.7.5 (4) for assertion of multiple penalties.

  3. 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.

  4. Multiple penalties may be imposed on one document if the failures relate to more than one of the following requirements:

    1. IRC 6050K(c)(1) notification of exchange of partnership interest,

    2. IRC 6109 supplying identifying numbers, including his/her TIN on a return, statement or document other than an information return or payee statement, (furnishing his or her TIN to another person, 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, and the TIN of a return preparer.

    3. IRC 215 - Alimony, etc., for the person receiving separate maintenance is required to furnish his or her TIN to the individual making separate maintenance payments, and the person making the separate maintenance payment is required to furnish on their return the TIN of the person receiving the separate maintenance payment.

    4. IRC 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.

  5. 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.

20.1.7.5.1  (07-15-2011)
Exceptions and Rules

  1. 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.

  2. The term "inconsequential" means any failure that does not make it difficult for the IRS 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.

20.1.7.6  (07-15-2011)
Regulations Requiring Returns on Magnetic Media IRC 6011(e)

  1. Information Returns:

    1. A filer must file electronically when filing more than 250 returns of the same type.

    2. If a filer timely filed paper returns, but was required to file electronically, the $50 ($100 as amended by the SBJA of 2010 for returns required to be filed on or after January 1, 2011) failure to file penalty will apply to the number of returns, of one type, required to be filed that exceed 250.

20.1.7.7  (07-15-2011)
Failure to Provide Reports on IRAs/Annuities

  1. 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:

    1. Furnish or file a return (Form 5498) within the time and manner prescribed, or

    2. Furnish or file a disclosure statement, a governing instrument, or an amendment.

  2. There is no limitation to the amount of the penalty for returns required under IRC 6693(a).

  3. The penalty under IRC 6693(a) shall not apply if the trustee or issuer of an annuity establishes reasonable cause.

20.1.7.7.1  (07-15-2011)
Overstatement of Designated Nondeductible Contributions IRC 6693(b)

  1. IRC 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).

    1. A $100 penalty may apply if an individual overstates the amount of his/her nondeductible contributions for any taxable year.

    2. The penalty may be abated if the overstatement is due to reasonable cause.

  2. Deficiency procedures do not apply.

20.1.7.8  (07-15-2011)
Waivers, Definitions and Special Rules IRC 6724

  1. 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.

  2. See IRM 20.1.1, Introduction and Penalty Relief, for discussion of Penalty Relief. The term "Penalty Relief" includes Reasonable Cause, Statutory Exception, Administrative Waiver, and IRS Error.

20.1.7.8.1  (07-15-2011)
Reasonable Cause

  1. The IRS may waive (abate or not assess) an information return penalty when a filer requests a waiver of the penalty and establishes reasonable cause. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  2. If the request properly establishes reasonable cause, the penalty may be abated using normal procedures.

  3. If reasonable cause is not established, disallow the request using normal procedures.

  4. If additional information is needed to substantiate a request for the waiver of a penalty due to reasonable cause, contact the taxpayer or authorized representative.

  5. In all cases involving unauthorized third party requests, correspond directly with the taxpayer to inform him/her of the action taken. Send a 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. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  6. If the correspondence contains the penalty of perjury language (jurat) 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, Penalty Removal Request Incomplete. The signature requirements are as follows:

    1. 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 6062).

    2. Partnerships - The statement may be signed by any one of the partners.

    3. 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.

  7. Reasonable cause for the information return penalties exists when:

    1. The filer acted in a responsible manner, both before and after the failure occurred, and

    2. There are significant mitigating factors, or

    3. The failure was the result of circumstances beyond the filer's control.

  8. Acting in a Responsible Manner would 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:

    1. Requesting appropriate extensions of time to file when practical to avoid the failure,

    2. Attempting to prevent a failure if it was foreseeable,

    3. Acting to remove an impediment or the cause of the failure, and

    4. Correcting the failure as promptly as possible, generally within 30 days.

  9. 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 20.1.7.8.2.

  10. 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:

    1. Do the reasons address the penalty that was assessed?

    2. Does the length of time between the event cited as a reason and the filing date negate the event's effect?

    3. Does the continued operation of a business after the event that caused the filer's noncompliance negate the event's effect?

    4. Should the event that caused the filer's noncompliance or increased liability have reasonably been anticipated?

    5. Was the penalty the result of carelessness or did the filer appear to have made an honest mistake?

      Note:

      Carelessness and forgetfulness are not examples of ordinary business care and prudence.

    6. Has the filer provided sufficient detail (dates, relationships) to determine whether they exercised ordinary business care and prudence?

    7. 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?

    8. Has the filer documented all pertinent facts, i.e. death certificate, doctor's statement, insurance statement for proof of fire, etc.?

    9. Does the filer have a history of being assessed the same penalty?

    10. Could the filer have requested an extension or filed an amended return?

  11. 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.

  12. 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:

    1. First time filer - prior to the failure, the filer had not previously been required to file this particular form or statement, First time filer procedures do not apply to the procedures for information return penalties, although it should be considered, penalties should not be waived or abated citing the first time filing criteria alone.

    2. The filer has a history of complying with the information return reporting requirements. The filer's history of compliance should be considered whether or not the filer specifically requests abatement on this basis.

      Note:

      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.

    3. Significant consideration is given to if the filer was previously penalized under IRC 6721, IRC 6722, or IRC 6723.

      Example:

      Failures that 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.

  13. 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.

  14. 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; 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.

    1. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ "≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    2. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ "≡ ≡ ≡ ≡ " ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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  15. 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. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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  16. Events beyond the filer's control - for the filer to establish reasonable cause under this category, the filer must show that s/he 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 items in this subsection.

  17. Actions by the IRS - To establish an event beyond the filer's control as the result of actions by the IRS, the filer must show it relied on erroneous written information provided by the IRS. The filer must also show that reliance on the written advice was reasonable and that it relied in good faith on the information. The filer must provide:

    1. A copy of the written information provided by the IRS including the name of the IRS employee and the date the erroneous advice was received,

    2. A copy of the request for information, including the steps taken and the specific facts given to the IRS, and the answer received.

    3. 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.

    4. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    5. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  18. 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:

    1. S/he exercised reasonable business judgment when contacting the agent, allowing the agent to timely file correct returns, or furnish correct payee statements.

    2. 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 that could establish reasonable cause.

    3. 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 his/her own merit 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.

  19. 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:

    1. The payee, or other person, failed to provide the necessary information to the filer, or

    2. The payee, or other person failed to provide correct information to the filer.

    3. The filer made available to the payee all necessary information to complete the filing

    4. The filer must provide documentary evidence when requested by the IRS showing that the failure was attributable to the payee.

    5. 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.

    6. 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.

  20. 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. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

  21. A supervening event includes, but is not limited to:

    1. A fire or other casualty that damages the business records or impairs the system for processing such records.

    2. 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.

    3. 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.

  22. 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, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ 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.

  23. 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 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:

    1. An excellent filing compliance record,

    2. Dated or certified mail documents showing filing made to the state or local taxing agency on or before the return due date, and

    3. Evidence that the act of misdirecting the return was due to extenuating circumstances, and not to carelessness or intentional disregard.

  24. Undue Economic Hardship related to filing on Magnetic/Electronic Media - When a filer with over 250 returns or statements fails to file on electronic media as required, the filer must show that they failed to file on electronic media because of a lack of hardware and that to meet the requirement would have caused an undue economic hardship.
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
    The filer must show that:

    1. The filer attempted to contract out the electronic media filing, and the cost was prohibitive as determined on the due date of the return.

    2. The filer support the prohibitive costs with two estimates from unrelated service bureaus or computer software/hardware companies.

    3. The filer filed the returns on paper.

    4. The undue economic hardship criteria does not prevent the filer from establishing reasonable cause based on other criteria that would be applicable to the electronic 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 electronic media.

  25. Additional electronic media events that may be considered beyond's the filer's control include:

    1. The filer relied upon an internal computer system that encountered major hardware and/or software problems. Verification by documentation should be provided.

    2. Reasonable cause should consider the filer's documentation of the following - the nature and severity of problems and efforts to correct in a timely fashion including the timely and consistent effort exercised by responsible officials within the organization to monitor problems and execution of corrective action. Inquire as to the efforts undertaken by the filer to meet filing obligations, including but not limited to contracting out to third parties, and/or filing the returns on paper to meet the due date.

    3. 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 electronic media information returns without contracting for a range of data other processing functions.

    4. 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 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.

    5. 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. Be alert that a prior waiver put the filer on notice as to the filing requirements.

20.1.7.8.2  (07-15-2011)
Responsible Manner

  1. In general, a filer will have acted in a responsible manner if the filer:

    1. Exercised reasonable care to determine his/her filing obligations and handle the account numbers and balances.

    2. 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.

  2. Correction of a failure is ordinarily considered prompt if made within 30 days after:

    1. The cause of the failure is removed,

    2. The failure is discovered, or

    3. 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).

20.1.7.8.2.1  (07-15-2011)
Missing TINs

  1. 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 by making the required solicitations.

  2. The term "solicitation" means a request to the payee to provide a TIN.

  3. The TIN will be treated as missing if it:

    1. Does not contain nine digits, or

    2. Includes a mixture of digits and letters.

20.1.7.8.2.2  (07-15-2011)
Solicitations Missing TINs

  1. In general, an initial solicitation and two annual solicitations are required for missing TINs.

  2. 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.

  3. If after the initial solicitation, the filer did not receive the TIN:

    1. 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

    2. By January 31 of the following year (for accounts opened or transactions that occurred in the preceding December).

  4. If after the first annual solicitation, a TIN was not received:

    1. 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 the transaction occurred.

    2. The initial and the first annual solicitations relate to the year the account was opened or the transaction occurred.

    3. The second annual solicitation relates to the year following the year the account was opened or transaction occurred.

    4. The filer must institute back-up withholding provisions at the applicable rate.

  5. Form 1098 requires an annual solicitation to the payee until a TIN is obtained.

  6. 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.

20.1.7.8.2.3  (07-15-2011)
Incorrect TINs

  1. In general, if the filer has been notified by the IRS or a broker of an incorrect TIN, they will have acted in a responsible manner only by making the required annual solicitations.

  2. The TIN will be treated as incorrect if the name/TIN combination does not match or cannot be found on the IRS or SSA records.

  3. Not currently issued TINs and Name/TIN mismatch accounts are considered to be incorrect for purposes of solicitations and penalty assessments under IRC 6724.

20.1.7.8.2.4  (07-15-2011)
Solicitations for Correct TINs

  1. In general, the filer is required to make an initial solicitation and no more than two annual solicitations for incorrect TINs.

  2. 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.

  3. If the filer is notified by the IRS or broker that the TIN is incorrect:

    1. A first annual solicitation must be made by December 31 of the calendar year in which the filer has been notified, or

    2. January 31 of the following year if notified in December.

    3. The mailing of the "B" Notice under IRC 3406(a)(1)(B) satisfies this requirement.

  4. If the filer is notified by the IRS or broker in any calendar year, following the first notification that the TIN is incorrect:

    1. A second annual solicitation must be made by December 31 of the calendar year following the calendar year in which the filer was notified,

    2. January 31 of the following year if notified in December, or

    3. The mailing of the "B" Notice under IRC 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 6724.

    If a filer has been notified of an incorrect name/TIN combination under IRC 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 IRS or a broker.

  5. Form 1098 requires an annual solicitation to the payee until a TIN is obtained.

  6. 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.

20.1.7.8.2.5  (07-15-2011)
Annual Solicitations

  1. An annual solicitation by mail must include:

    1. A letter stating that the payee must provide its TIN or the payee will be subject to a $50 ($100 as amended by the SBJA of 2010 for returns required to be filed on or after January 1, 2011) penalty imposed by the IRS,

    2. A Form W-9 or acceptable substitute form on which the payee may provide their TIN, and

    3. A return envelope.

  2. An annual solicitation made by telephone must:

    1. Be made in a manner that will encourage the payee to provide their TIN,

    2. 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,

    3. Include a request for the TIN of the payee, and

    4. Inform the payee that if the payee fails to furnish their TIN, the payee is subject to a $50 ($100 as amended by the SBJA of 2010 for returns required to be filed on or after January 1, 2011) penalty.

  3. The filer must maintain concurrent records showing the solicitations were properly made, and provide concurrent records to the IRS upon request.

20.1.7.8.2.6  (07-15-2011)
Exceptions and Limitations

  1. When an information reporting provision specifically provides the time and manner for obtaining a TIN, the solicitation requirements in this IRM 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:

    1. For Form 1099-S, the filer is only required to make an initial solicitation on or before the related real estate closing date.

    2. For Form 1098, the filer is required to do an annual solicitation until the TIN is received.

  2. The penalty waiver provisions apply when:

    1. The solicitation requirements under Treas. Reg. 301.6724-1(e) or Treas. Reg. 301.6724-1(f), or

    2. Treas. Reg. 31.3406(d)-5 are met.

  3. Annual solicitation is not required for a year if:

    1. Payments were not made, or

    2. A return was not required to be filed.

  4. 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.

  5. To avoid making more than the required annual solicitations, filers should follow the provisions of IRC 3406(a)(1)(B) and section Treas. Reg. 31.3406(d)-5 for accounts subject to backup withholding mailing, rather than the mailing requirements for Treas. Regs. 301.6724-1(e) or (f). This would apply to Form 1099-B, Form 1099-INT, Form 1099-DIV, Form 1099-MISC, Form 1099-OID, and Form 1099-PATR.

  6. If a filer fails to make one or more of the required solicitations, the filer may satisfy the solicitation requirement by:

    1. Making two consecutive annual solicitations in subsequent years, and

    2. After receiving the TIN, including it on any information return filed in the future.

  7. The penalty will apply to:

    1. The years the solicitation was not made, and

    2. Subsequent years until the filer has completed the make-up solicitations.

  8. 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. Financial institution are also not required to make annual solicitations in cases of window transactions (one time transactions as in the issuance of savings bonds.)

  9. A filer is not required to make annual solicitations by mail on accounts where:

    1. Previous solicitations have been returned as undeliverable,

    2. Other mailings have been returned as undeliverable, and

    3. The filer has not been provided with a new address.

  10. In general, no more than two annual solicitations are required to establish that the filer acted in a responsible manner.

20.1.7.8.2.7  (07-15-2011)
Special Abatement Conditions

  1. 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.

    1. 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).

    2. If there is a TC 520 and a "- V" freeze on the account: - Check directly with the Insolvency Unit supporting the Area. Insolvency Support will advise how to proceed. 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.

    3. 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.

    4. If a "- Z" freeze is on the account, refer the module to the Criminal Investigation Division. Do not assess the penalty.

  2. 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 7507(a) Insolvency includes:

    1. The respondent is a bank, trust company, or savings and loan association, and

    2. The organization is bankrupt and/or protected under IRC 7507(a).

  3. If the reply to the penalty proposal or penalty notice indicates that:

    1. A failed savings and loan is under the receivership of the Resolution Trust Corporation (RTC), or

    2. A failed bank is under the receivership of the Federal Deposit Insurance Corporation (FDIC), forward the information to:
      Centralized Insolvency Operation (CIO)
      PO Box 7346
      Philadelphia, PA 19101-7346

      (See IRM 5.9.11 and IRM 5.9.20). 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.)

    3. If Centralized Insolvency decides that the penalty should be waived, they will refer the case back to the IRP Penalty Unit to close out the case (or proposal) or to abate the penalty.

    4. If the penalty will be sustained, Centralized Insolvency will return the case to the IRP 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.

    5. Centralized Insolvency will notify the IRP Penalty Unit of their decision to abate or not abate within 10 working days. If not, the IRP Penalty Unit will follow-up with the designated classification specialist.

    6. If a penalty proposal notice with RTC/FDIC shown as the entity was referred to Centralized Insolvency before being mailed, the response from Centralized Insolvency will indicate whether or not the IRP Penalty Unit should mail the proposal notice or close the case with no further action.

  4. For state agencies if the taxpayer's response indicates that the information returns reported liquidated dividends, abate or do not assess the penalty or the applicable portion that applies to the liquidation distribution.

  5. IRC 404(k) dividend distributions, reported on Form 1099-DIV, are not subject to penalties under IRC 6721, IRC 6722, or IRC 6723. These dividends are not true dividend distributions reportable under IRC 6042, but are Employee Stock Ownership Plan distributions reportable under IRC 6047, and therefore are subject to penalties under IRC 6652(e). The IRS has allowed the filing community to report ESOP distributions on Form 1099-DIV.

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  7. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡
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  8. 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 systemically for the paper returns processed through OCR and for electronically 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.

    1. ISRP returns can be identified by the presence of a Campus code in the first two positions of the DLN.

    2. 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.

    3. If ISRP input is verified, abate the applicable portion of the penalty. For example, if the filer submits 100 Form 1099-INT late and indicates in the reply that 10 were not required to be filed, reduce the penalty by 10 times the applicable penalty amount.

  9. If all returns on the PMF transcript were filed on 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.

  10. Additional exceptions to the filing requirements are shown in the Instructions to filers of Form 1098, Form 1099, Form 5498, and Form W-2G.

  11. 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:

    1. The filer must show that he acted in a responsible manner by requesting the TIN from the payee, or

    2. 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.

  12. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

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20.1.7.8.2.8  (07-15-2011)
Civil Penalties Statute of Limitations

  1. No statute of limitations applies to unfiled returns. Penalties may be assessed at any time. See IRC 6501(c)(3).

  2. 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 6501(a).

Exhibit 20.1.7-1 
IRC 6721 Penalty for Large Businesses with Gross Receipts Over 5 Million

Time of Filing Returns Due Before
01-01-2011
Changes Effective
01-01-2011
Not more than 30 days late $15 per return / $75,000 maximum $30 per return / $250,000 maximum
31 days late - August 1 $30 per return / $150,000 maximum $60 per return / $500,000 maximum
After August 1 $50 per return / $250,000 maximum $100 per return / $1,500,000 maximum
Intentional disregard $100 per return / no limitation $250 per return / no limitation

Exhibit 20.1.7-2 
IRC 6721 Penalty for Businesses with Gross Receipts Less Than or Equal to 5 Million

Time of Filing Returns Due Before
01-01-2011
Changes Effective
01-01-2011
Not more than 30 days late $15 per return / $25,000 maximum $30 per return / $75,000 maximum
31 days late - August 1 $30 per return / $50,000 maximum $60 per return / $200,000 maximum
After August 1 $50 per return / $100,000 maximum $100 per return / $500,000 maximum
Intentional disregard $100 per return / no limitation $250 per return / no limitation

Exhibit 20.1.7-3 
IRC 6722 penalty for Large Businesses with Gross Receipts Over 5 Million

Time of Filing Returns Due Before
01-01-2011
(no tiered rate/no large business - small business differentiation)
Changes Effective
01-01-2011
Not more than 30 days late $50 per return / $100,000 maximum $30 per return / $250,000 maximum
31 days late - August 1 $50 per return / $100,000 maximum $60 per return / $500,000 maximum
After August 1 $50 per return / $100,000 maximum $100 per return / $1,500,000 maximum
Intentional disregard $100 per return / no limitation $250 per return / no limitation

Exhibit 20.1.7-4 
IRC 6722 penalty for Businesses with Gross Receipts Less Than or Equal to 5 Million

Time of filing Returns due before 01-01-2011 (no tiered rate/no large business - small business differentiation) Changes effective 01-01-2011
Not more than 30 days late $50 per return / $100,000 maximum $30 per return / $75,000 maximum
31 days late - August 1 $50 per return / $100,000 maximum $60 per return / $200,000 maximum
After August 1 $50 per return / $100,000 maximum $100 per return / $500,000 maximum
Intentional disregard $100 per return / no limitation $250 per return / no limitation

Exhibit 20.1.7-5 
500 Series Penalty Reference Numbers

Reference Number IRC Description
     
500 IRC 6721 Late Filing Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was not correctly and timely filed.
501 IRC 6721 Magnetic Media Penalty
A penalty is charged for each Form 1098, Form 1099, or Form W-2 (after the first 250 forms of each type) required by IRC 6011 (e)(2)(a) not filed electronically.
502 IRC 6721 Missing or Incorrect TIN Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G submitted with missing or incorrect TINS.
503 IRC 6721 Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G submitted in an improper format as provided for in the IRC, Treasury Regulations and/or Social Security Administration procedures.
504 IRC 6721 Late and Electronic Media Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was not filed:
Correctly and timely, and
Electronically (over 250 forms)
505 IRC 6721 Late and Missing or Incorrect TIN Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was:
Not correctly and timely filed, and
Submitted with a missing or incorrect TIN,
506 IRC 6721 Late and Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form 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 IRC 6721 Electronic Media and Missing or Incorrect TIN Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was :
Not filed electronically (over 250 forms) and
Filed with missing or incorrect TINS.
508 IRC 6721 Electronic Media and Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was not:
Filed electronically and
Submitted in a proper format as provided for in the IRC, Treasury Regulations, or Social Security Administration procedures.
509 IRC 6721 Missing or Incorrect TIN and Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form 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 IRC 6721 Late, Electronic Media and Missing or Incorrect TIN Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was:
Not correctly and timely filed, and
Not filed electronically (after the first 250 forms of each type) required by IRC 6011(e)(2)(a), and
Filed with missing or incorrect TINs.
511 IRC 6721 Late, Electronic Media, and Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was not:
Correctly and timely filed,
Filed electronically (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 IRC 6721 Late, Missing or Incorrect TIN, and Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form 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 IRC 6721 Electronic 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,
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 IRC 6721 Late, Electronic Media, Missing or Incorrect TIN and Improper Format Penalty
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was:
Not correctly and timely filed electronically
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 IRC 6721(e) Penalty in the Case of Intentional Disregard
The penalty is assessed per failure to file Form W-2
A penalty is charged for each Form W-2 that was not filed as required by IRC 6051.

Exhibit 20.1.7-6 
Penalty Reference Numbers (600 Series)

Penalty Reference Numbers marked with an asterisk "*" identify penalties assessed with Form 8278.

Caution:

Refer to and use the most current revision of Form 8278.

PRN IRC section Description
600* IRC 6721 Failure to File Correct Information Returns.--
A penalty is charged for each Form 1098, Form 1099, Form W-2, or Form W-2G that was:
Not correctly and timely filed, and
Not filed electronically (after the first 250 forms of each type) required by IRC 6011(e)(2)(a), and
Filed with missing or incorrect TINs.
603* IRC 6038C A penalty is charged for each Failure of Foreign Corporation Engaged in a U.S. Business to Furnish Information or Maintain Records.
604* IRC 6652(f) A penalty is charged for each Failure of Foreign Person to File Return Regarding Direct Investment in U.S. Real Property Interests.
605* IRC 6686 A penalty is charged for each Failure to File Returns or Supply Information by DISC or FSC.
606* IRC 6695A A penalty is charged for Substantial and Gross Valuation Misstatements Attributable to Incorrect Appraisals.
609   Reserved
611* IRC 6652(c)(3)(A) A penalty is charged for each Failure to File a Disclosure Required of Tax-exempt Entity.
612* IRC 6722 A penalty is charged for each Failure to Furnish Correct Payee Statement.
613* IRC 6679 A penalty is charged for each Failure to File Returns, Etc., With Respect to Foreign Corporations or Foreign Partnerships.
    A penalty is charged to each Failure to File Form 5471, Schedule O/Form 8865, Schedule P. See IRC 6046 and IRC 6046A.
614* IRC 6714 A penalty is charged for each Failure to Meet Disclosure Requirements Applicable to Quid Pro Quo Contributions as required by IRC 6115.
616* IRC 6682 A penalty is charged for each statement containing False Information with Respect to Withholding. See IRM 20.1.10.8.
618 IRC 6672 A penalty is charged for each Failure to Collect and Pay Over Tax, or an Attempt to Evade or Defeat Tax. See IRM 20.1.10.5.
    Trust Fund Recovery Program. The penalty is assessed against responsible corporate officers.
619* IRC 6679(a)(2)
IRC 6677
IRC 6038(b)(2)
IRC 6038A(d)(2)
A penalty is charged for each Failure to File Returns with Respect to Foreign Corporations or Foreign Partnerships.
621* IRC 6723 A penalty is charged for each Failure to Comply with Other Reporting Requirements.
623* IRC 6038 A penalty is charged for each Failure to Furnish Information with Respect to Certain Foreign Corporations.
    Failure to File Form 5471 and/or Form 8865.
624* IRC 6695 Other Assessable Penalties with Respect to the Preparation of Income Tax Returns for Other Persons.
    Any failure by the preparer to:
  IRC 6695(a) Furnish a copy of the return to the taxpayer
  IRC 6695(b) Sign the return
  IRC 6695(c) Furnish the preparer's identifying number
  IRC 6695(d) Retain a copy, return or list, as required by IRC 6107(b)
  IRC 6695(e) File a correct information return or other requirement of IRC 6060
625* IRC 6038A Information with Respect to Certain Foreign owned Corporations.
    A penalty is charged for each Failure to furnish information or maintain records as required by IRC 6038A(a) and IRC 6038A(b). Form 5472
626* IRC 6695(f) A penalty is charged for each Negotiation of Check by tax return preparer.
627* IRC 6695(g) A penalty is charged for each Failure by Preparer To Be Diligent in Determining Eligibility for EIC.
628* IRC 6700 A penalty is charged for Promoting Abusive Tax Shelters
629* IRC 6652(c)(3)(B)(ii) A penalty is charged for each Failure by Entity or Manager to Comply with Written Demand to File a Disclosure Required Under IRC 6033(a)(2).
630* IRC 6720 A penalty is charged for each Donee's Failure to Issue Acknowledgement on Used Vehicle Donation As Required by IRC 170(f)(12).
631* IRC 6701 Penalties are charged for Aiding and Abetting Understatement of Tax Liability.
632* IRC 6705 A penalty is charged for each Failure by a Broker to Provide Notice to a Payor. See IRM 20.1.10.11.
633* IRC 6713 A penalty is charged for each Disclosure or Use of Information by Preparer of Returns.
634* IRC 6707 A penalty is charged for Failure to Furnish Information Regarding Tax Shelters Required by IRC 6111(a).
635* IRC 6651(f) A penalty is charged for Fraudulent Failure to File (attributable to tax required to be shown on a return). (subjected to deficiency procedures
636* IRC 6708 A penalty is charged for Failure to Maintain Lists of Investors/Advisees in Potentially Abusive Tax Shelters Required by IRC 6112(a).
637* IRC 6721(a)(1) or IRC 6722(a) A penalty is charged for Failures to file Returns Relating to Higher Education Tuition and Related Expenses as required by IRC 6050S (Form 1098–E).
638* IRC 6721 A penalty is charged for each Failure To File related to Form 8027, Employer’s Annual Information Return of Tip Income and Allocated Tips, as required by IRC 6053.
639* IRC 6704(b) A penalty is charged for Failure to Keep Records Necessary to Meet Reporting Requirements Under IRC 6047(d).
643* IRC 6673(a) Sanctions and Costs Awarded by Tax Courts. See IRM 20.1.10.6.1.
644* IRC 6673(b) Sanctions and Costs Awarded by Courts Other Courts (IRC 7433). See IRM 20.1.10.6.2.
645* IRC 6694(a) A penalty is charged for each Understatement of Taxpayer’s Liability by Tax Return Preparer.
647* IRC 6710 A penalty is charged for each Failure to Disclose that Contributions are Nondeductible as required by IRC 6113.
648* IRC 6707A Penalty for Failure to Include Reportable Transaction Information with Return (Form 8886, Reportable Transaction Disclosure Statement).
649* IRC 6652(l) A penalty is charged for a Failure by Corporation to file returns required by IRC 6043(c) (Form 8806, Information Return for Acquisition of Control or Substantial Change in Capital Structure). See IRM 20.1.10.3.5.
650* IRC 6694(b) A penalty is charged for each Willful or Reckless Understatement of Taxpayer’s Liability by Tax Return Preparer.
651* IRC 6721(a) A penalty is charged for each Failure to Comply with Certain Information Reporting Requirements - Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
652* IRC 6721(e)(2)(C) A penalty is charged for the Intentional Disregard of the Failure to comply with Certain Information Reporting Requirements - Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
653* IRC 6722(a) A penalty is charged for each Failure to Furnish Correct Statements Required by IRC 6050I(e) - Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
654* IRC 6722(c) A penalty is charged for the Intentional Disregard of the Requirement to Furnish a Correct Payee Statement Required by IRC 6050I(e) - Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
655* IRC 6717(a)
IRC 7342
Penalty for Refusal to Permit Entry or Examination Allowed by IRC 4083(d)(1). See IRM 20.1.11.7.2 and IRM 20.1.11.9.
656* IRC 6715 Penalty for Dyed Fuel Sold For Use or Used in Taxable Use, Etc. See IRM 20.1.11.5.
657* IRC 6718 Penalty for Failure to Display Tax Registration on Vessels. See IRM 20.1.11.7.4.
658* IRC 6652(c)(2)(A) A penalty is charged for each Failure to File Information Return Required by IRC 6034 (relating to returns by certain trusts) or IRC 6043(b) (relating to terminations, etc., of exempt organizations).
659* IRC 6677 A penalty is charged for each Failure to File Information With Respect to Certain Foreign Trusts as required by IRC 6048 - Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
660* IRC 6677(b) A penalty is charged for each Failure to File Form 3520-AAnnual Return of Foreign Trust With a U.S. Owner - IRC 6048(b).
661* IRC 6675 A penalty is charged for Excessive Claims Relating to Fuels not Used for Taxable Purposes - Per IRC 6427. See IRM 20.1.11.4.
662*
(BMF)
IRC 527(j)(1) A penalty is charged for each Failure to Make Required Disclosure of Expenditures and Contributions (Form 8872, Political Organization Report of Contributions and Expenditures).
663*
(BMF)
IRC 6652(c)(1)(A) A penalty is charged for Failures Related to Annual Returns Required by IRC 6033(a)(1) (Exempt Organizations) and IRC 6012(a)(6) (Political Organizations).
664* IRC 6712 A penalty is charged for each Failure to Disclose Treaty-Based Return Position as required by IRC 6114.
665* IRC 6715A A penalty is charged for Tampering With, or Failing to Maintain Security Requirements, for Mechanical Dye Injection Systems. See IRM 20.1.11.6.
666* IRC 6702(a) A penalty is charged for each Frivolous Return Filed

Caution:

Only PRN 666 assesses IRC 6702(a) after 1/24/2005


See IRM 20.1.10.10.1.
667* IRC 6725 A penalty is charged for each Failure to Report Information Under IRC 4101 (failure to report a vessel/facility). See IRM 20.1.11.7.7.
668* IRC 6039F(c) A penalty is charged for each Failure to File Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, to Report Receipt of Foreign Gifts
669*
(IMF)
IRC 6688 A penalty is charged for each Failure to File Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession, Regarding Residence in a US Possession as Required by IRC 937(c).
670* IRC 6719 A penalty is charged for each Failure to Register or Reregister as Required by IRC 4101. See IRM 20.1.11.7.5.
671*
(IMF)
IRC 6039G A penalty is charged for each Failure to File Form 8854, Initial and Annual Expatriation Information Statement, regarding Expatriate/Residency Report
672* IRC 6721 A penalty is charged for Failures in Regard to Information Returns Relating to Taxable Mergers and Acquisitions as Required by IRC 6043A.
673* IRC 6720A A penalty is charged for the Resale of Certain Adulterated Diesel Fuels. See IRM 20.1.11.7.6.
674* IRC 6723 A penalty is charged for each Failure to Provide Notice of Partnership Exchange as required by IRC 6050K.
676* IRC 6038B A penalty is charged for each Failure to File Notice of Certain Transfers to Foreign Persons (Failure to File Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation) (Failure to File Form 8865, Schedule O, Transfer of Property to a Foreign Partnership)
678* IRC 6706(a) A penalty is charged for each Failure to Show Information on Debt Instrument Required by IRC 1275(c)(1) (reported on Form 8281, Information Return for Publicly Offered Original Issue Discount Instruments). See IRM 20.1.10.12.1.
  IRC 6706(b) A penalty is charged for Failure to Furnish Information to Secretary Required by IRC 1275(c)(2) (reported on Form 8281,). See IRM 20.1.10.12.3.
679*
(IMF)
IRC 6039E A penalty is charged for each Failure by Passport and Immigration Applicants to Provide Information Concerning Residence Status.
680 IRC 6662 Accuracy-related Penalties
681 IRC 6662A Accuracy-related Penalty on Understatements with Respect to Reportable Transactions.
684 IRC 7519(f)(4) A penalty is charged for Failures to Make Required Payments for Entities Electing Not to Have Required Taxable Year (IRC 444 Elections). See IRM 20.1.10.17.
686 IRC 6651(f) Increase in Penalty for Fraudulent Failure to File (attributable to a deficiency). See IRM 20.1.2.2.7.5 and IRM 25.1.7. (not subjected to deficiency procedures)

Note:

688 identifies failure by a large partnership (more than 100 partners) to file electronically. The penalty is assessed systemically with Transaction Code (TC) 246. See IRM 21.7.4.4.2.8.1, Large Partnership Penalty for Failing to File Electronically, for additional information.

Note:

689 is NOT a Penalty Reference Number. It is used by TEGE for sanction assessments pertaining to closing agreements. See IRM 4.5.2.3.1.29(19), Credit and Tax Computation Adjustment (Item 15), for additional information.

Exhibit 20.1.7-7 
PMF Civil Penalty Transcript

(1) The table below describes a PMF civil penalty transcript screen print.

  Field Description
1. Entity Information. The word "linked" indicates a match between the IMF/BMF entities and the PMF entities.
2. Filing History
  1. Indicates if Information Returns were filed in the tax year.

  2. Penalty indicator codes

3. Submission Record:
  1. Original transmitted Paper or electronic media.

  2. Amended transmitted Paper or electronic media.

  3. Replace transmitted electronic media only.

  4. Number of documents subject to a penalty.

  5. Received date for late filing.

  6. DLN of the Form 1096, MSN of Form W-3.

  7. Total money amount and withholding reported on forms filed.

4. Summary:
  1. Total original, amended, replace documents submitted.

  2. Number of documents subject to penalty.

  3. Total amount reported.

  4. Backup withholding.

  5. Waiver and extensions granted.

  6. Summary of penalties by return type.

  7. Dollar amount of penalty assessed.


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