Income Tax Updates

June 29, 2015: Form 1099 Penalties effective with returns required to be FILED after December 31, 2015 (i.e., for calendar years 2015 and later).

1. The penalty under Section 6721 for not filing correct information returns increases. (Not filing a required information return is considered not filing a correct information return.)
   1. The penalty is $250 per return (an increase from the previous $100 per return penalty).
   2. If there is an unintentional delinquency and it is corrected no more than 30 days after the return due date, the penalty is reduced to $50 per return (formerly $30 per return).
   3. If there is an unintentional delinquency and it is corrected more than 30 days after the return due date but on or before August 1, the penalty is reduced to $100 per return (formerly $60 per return).
   4. The penalties above still have maximum amounts, but of course these maximums increased compared to prior years.
   5. The penalty for intentional disregard also increased from $250 per return to $500 per return.
2. The penalty under Section 6722 for not furnishing information returns (i.e., Forms 1099) to payees increases.
   1. The penalty is $250 per return (an increase from the previous $100 per return penalty).
   2. If there is an unintentional delinquency and it is corrected no more than 30 days after the return due date, the penalty is reduced to $50 per return (formerly $30 per return).
   3. If there is an unintentional delinquency and it is corrected more than 30 days after the return due date but on or before August 1, the penalty is reduced to $100 per return (formerly $60 per return).
   4. The penalties above still have maximum amounts, but of course these maximums increased compared to prior years.
   5. The penalty for intentional disregard also increased from $250 per return to $500 per return.

JUST IN CASE YOU MISSED THE ABOVE DISCUSSION, the total penalties for a taxpayer who does not prepare a required Form 1099 is now $500 per Form 1099 ($250 for not sending a copy to IRS plus $250 for not giving a copy to the payee).

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