When meeting with a new client regarding an outstanding tax debt we generally ask if all required W-2’s and 1099’s and have been filed. It is not uncommon for the client to casually respond that they need file those also. They are often surprised to hear of the substantial penalties that apply for the failure to file these information returns. Since the IRS assesses these penalties on a per return basis the resulting penalties can be very significant when there are numerous documents that have not been submitted.
Under the Small Business Jobs Act, the IRS has implemented higher penalties for failure to file information returns such as a W-2’s or 1099’s. The new penalty structure is designed to encourage businesses to file these returns as soon as possible. The quicker the delinquent returns are filed, the smaller the penalty.
- First tier penalties have been doubled from the previous amount to $30 per return. These penalties apply to any information return that is submitted after the filing deadline but within 30 days. The maximum penalty for a calendar year has been increased from $75,000 to $250,000 (from $25,000 to $75,000 for small filers).
- Second tier penalties have been doubled from the previous amount to $60 per return. These penalties apply to any information return that is submitted more than 30 days after the filing deadline but before August 1st. The maximum penalty for a calendar year has been increased from $150,000 to $500,000 (from $50,000 to $200,000 for small filers).
- Third tier penalties have been doubled from the previous amount to $100 per return. These penalties apply to any information return that is submitted after August 1st. The maximum penalty for a calendar year has been increased from $250,000 to $1.5 million (from $100,000 to $500,000 for small filers).
- The penalty for intentional failure to file has been increased from $100 to $250 per return.
The new penalty structure applies to information returns that were required to be filed on or after January 1, 2011.
