Penalties for not filing correct information returns like 1098, 1099, W-2 and W-2G have increased
Effective with returns due after January 1, 2016, penalties for not filing correct information returns and/or not furnishing correct payee statements have increased and are now subject to inflationary adjustments.
Examples of affected forms include: Forms 1098, 1099, W-2G and W-2.
The amount of the penalty is based on when you file the correct information return or furnish the correct payee statement. The penalty for not filing a correct information return is separate from the penalty for not providing the correct payee statement. For example, if you don’t 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.
To Avoid Penalties
Beginning with the 2016 tax year:
Employers must send Copy A of Forms W-2 and W-3 to the Social Security Administration by January 31 of the following year for both paper and electronic forms.
Employers must furnish Copy B and any other applicable copies of information returns to the employee by January 31 of the following year.
Businesses, including tax exempt and government entities, must send Copy A of Form 1099-MISC to the IRS by:
- January 31 of the following year when you’re reporting non-employee compensation payments in Box 7;
- February 28 if filing by paper when you’re NOT reporting non-employee compensation in Box 7; or
- March 31 if filing electronically when you’re NOT reporting non-employee compensation in Box 7.
In years prior to the 2016 tax year:
Businesses, including tax exempt and government entities, must send Copy A of Forms 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; or
- March 31 if filing electronically.
Employers were also required to send Copy A of Form W-2 to the Social Security Administration with transmittal Form W-3 by:
- The last day of February of the following year if filing by paper; or
- March 31 if filing electronically.
In addition, employers filing 250 or more information returns must file electronically unless granted a waiver by the IRS.
Penalty Rates
The penalty rates and maximums for not filing correct information returns and/or not furnishing correct payee statements, including inflationary adjustments if applicable, are reflected in the following table (*-as adjusted for inflation):
| Large Businesses with Gross Receipts of More Than $5 Million and Government Entities (*Average annual gross receipts for the most recent 3 taxable years) IRC 6721 & IRC 6722 |
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| Time returns filed/furnished | Due 01-01-2011 thru 12-31-2015 |
Due 01-01-16 thru 12-31-2016 (inflation adjusted) |
Due 01-01-17 thru 12-31-2017 (inflation adjusted) |
Due 01-01-18 thru 12-31-2018 (inflation adjusted) |
|---|---|---|---|---|
| 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 |
$50 per return/ $536,000 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 |
$100 per return/ $1,609,000 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 |
$260 per return/ $3,218,500 maximum |
| Intentional Disregard | $250 per return/ No limitation |
$520 per return/ No limitation |
$530 per return/ No limitation |
$530 per return/ No limitation |
Note: Increased penalty amounts may apply for certain failures in the case of intentional disregard.
See IRC 6721(e)(2) and IRC 6722(e)(2).
| Small Businesses with Gross Receipts $5 Million or Less (*Average annual gross receipts for the most recent 3 taxable years) IRC 6721 & IRC 6722 |
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| Time returns filed/furnished | Due 01-01-2011 thru 12-31-2015 |
Due 01-01-16 thru 12-31-2016 (inflation adjusted) |
Due 01-01-17 thru 12-31-2017 (inflation adjusted) |
Due 01-01-18 thru 12-31-2018 (inflation adjusted) |
|---|---|---|---|---|
| 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 |
$50 per return/ $187,500 maximum |
| 31 days late – August 1 | $60 per return/ $200,000 maximum |
$100 per return/ $529,500 maximum |
$100 per return/ $532,000 maximum |
$100 per return/ $536,000 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 |
$260 per return/ $1,072,500 maximum |
| Intentional Disregard | $250 per return/ No limitation |
$520 per return/ No limitation |
$530 per return/ No limitation |
$530 per return/ No limitation |
Penalties for not filing 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;
- Don’t report a Taxpayer Identification Number (TIN);
- Report an incorrect TIN; or
- Don’t file paper forms that are machine readable.
Penalties for not providing 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.
For more information on penalties, information returns and payee statements, see General Instructions for Certain Information Returns (PDF) and General Instructions for Forms W-2 and W-3 (PDF).
