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Increase in Information Return Penalties

Alert – New January 31 due date for Form W-2, W-3 and Certain Forms 1099-MISC

Penalties for failure to file correct information returns and/or to furnish correct payee statements have increased and are now subject to inflationary adjustments. Information returns and payee statements include, for example, Forms 1098, 1099, W-2G and W-2.

Per Section 208 of Public Law (P.L.) 113-295, effective for information returns required to be filed in a calendar year beginning after 2014, the base penalty rates and maximum penalties are subject to annual inflationary increases. Section 806 of P.L. 114-27 increased the base penalties for failure to file correct information returns and provide correct payee statements for returns required to be filed after December 31, 2015.

Employers must send Copy A of Form(s) 1098, 1099, W-2G and other information returns to the Internal Revenue Service with transmittal Form 1096 by the last day of February of the following year if filing by paper, March 31 if filing electronically. Copy A of Form(s) W-2 must be sent to the Social Security Administration with transmittal Form W-3 by the last day of February of the following year if filing by paper, March 31 if filing electronically. In addition, employers filing 250 or more information returns must file electronically unless granted a waiver by the IRS.

Beginning with the 2016 tax year, the due dates for filing Forms W-2 and W-3 with SSA will be January 31 of the following year, whether you file using paper forms or electronically. Form 1099-MISC will be due to the IRS by January 31 of the following year when you’re reporting non-employee compensation payments in box 7. Otherwise, file by February 28 if filing by paper, March 31 if filing electronically.

Employers must furnish Copy B and any other applicable copies of information returns to the employee by January 31 of the following year. Penalties, information returns and payee statements are discussed in the General Instructions for Certain Information Returns and General Instructions for Forms W-2 and W-3.

The penalty rates and maximums for failure to file correct information returns and/or to furnish correct payee statements, including inflationary adjustments if applicable, are reflected in the following two tables (*-as adjusted for inflation):

Large Businesses with Gross Receipts of More Than $5 Million and Governmental Entities
Time returns filed/furnished Returns due 01-01-2011 thru 12-31-2015 Returns due 01-01-16 thru 12-31-2016 Returns due 01-01-17 thru 12-31-2017
Not more than 30 days late
(by March 30 if the due date is February 28)
$30 per return/
$250,000 maximum
$50 per return/
$529,500* maximum
$50 per return/
$532,000* maximum
31 days late – August 1 $60 per return/
$500,000 maximum
$100 per return/
$1,589,000* maximum
$100 per return/
$1,596,500* maximum
After August 1 or Not At All $100 per return/
$1,500,000 maximum
$260* per return/
$3,178,500* maximum
$260 per return/
$3,193,000* maximum
Intentional Disregard $250 per return/
No limitation
$520* per return/
No limitation
$530* per return/
No limitation

 

Small Businesses with Gross Receipts $5 Million or Less
Time returns filed/furnished Returns due 01-01-2011 thru 12-31-2015 Returns due 01-01-16 thru 12-31-2016 Returns due 01-01-17 thru 12-31-2017
Not more than 30 days late
(by March 30 if the due date is February 28)
$30 per return/
$75,000 maximum
$50 per return/
$185,000* maximum
$50 per return/
$186,000* maximum
31 days late – August 1 $60 per return/
$200,000 maximum
$100 per return/
$529,500* maximum
$100 per return/
$532,000* maximum
After August 1 or Not At All $100 per return/
$500,000 maximum
$260* per return/
$1,059,500* maximum
$260 per return/
$1,064,000* maximum
Intentional Disregard $250 per return/
No limitation
$520* per return/
No limitation
$530* per return/
No limitation

Penalties for Failure to File Correct Information Returns (Code Section 6721) may apply if you:

  • don’t file a correct information return by the due date and a reasonable cause is not shown,
  • file on paper when you were required to file electronically,
  • fail to report a Taxpayer Identification Number (TIN),
  • report an incorrect TIN, or
  • fail to file paper forms that are machine readable.

Penalties for Failure to Furnish Correct Payee Statements (Code Section 6722) may apply if:

  • you don’t provide a correct payee statement by the applicable date and a reasonable cause isn’t shown,
  • all required information isn’t shown on the statement, or
  • incorrect information is included on the statement.

The amount of the penalty is based on when you file the correct information return or furnish the correct payee statement. A penalty for failure to file a correct information return is separate from the penalty for failure to furnish the correct payee statement. For example, if you fail to file a correct Form 1099-MISC with the IRS and don’t provide a correct Form 1099-MISC statement to the payee, you may be subject to two separate penalties.

Page Last Reviewed or Updated: 26-Oct-2016