Are you prepared to mail out information returns this month? A law was passed in 2015, changing the penalty amounts for failing to file the IRS information returns and not giving required statements to payment recipients. This affects all business owners who need to know what happens if the forms are not sent out by January 31, 2017.
Copies of the information returns must be sent to the payees as statements. When these statements are required, if forms are not filed you are hit twice by the IRS. You will owe money for failing to file the form and failing to give the form to the necessary recipient(s). The amount paid to the IRS for failing to file varies by how long you are late and whether you did it purposefully. If you are a small taxpayer (Gross receipts of less than 5 million), these are the changes affecting you:
- The penalty for failing to file an information return (on purpose) is now $250, up from $100.
- If you missed the deadline and you correct the error within 30 days of the due date, you pay a penalty of $50, up from $30 in 2016.
- If you fixed the unintentional failure more than a month after the due date but before August 1st, the fee is $100, an increase from $60.
- The maximum penalty for more than one unintended failure during a calendar year doubled. It is now $1,000,000, rather than $500,000.
- If a business intentionally fails to file multiple times in a year and corrects them within 30 days, the penalties could go up to $175,000, which is a significant increase from $75,000.
- If a firm intentionally fails to file multiple times, takes longer than 30 days to file, but turns it in before August 1st, the penalty can be as much as $500,000, instead of $200,000 in prior years.
If a business does not file payee statements, the same fees apply. There are many things you can be fined on for not filing. Here is a listing of typical forms that need to be submitted:
Schedule K-1
Form 1099 Misc
Form W-2
Form 1095-B
Form 1095-C
To avoid penalties and fees, make sure all required forms are mailed to recipients and filed with the IRS timely.
Much of this information was originally published by MarketWatch and authored by Bill Bischoff.
