The Trade Preference Extension Act (the TPE) became law on 6/29/15, and included in it were a few little-noticed but significant changes to the penalties for failing to file required information returns (i.e. 1099s and W-2s) and, in some cases, for failing to send copies to the necessary parties (e.g. payees such as vendors and employees).
So how big are these new penalties?
That depends on a few key variables, notably:
- How long after the due date you finally get them filed (and get copies sent to the payees)
- Whether the failure was intentional or unintentional
- How big of a taxpayer/business you are
What does that mean in actual numbers?
- At the bottom of the range, one unintentional failure-to-file will cost you $250 (up from $100)
- At the top of the range, the maximum penalty on any one taxpayer, which would be the result of multiple unintentional failures to file in a single year, is $3 million (yes, million, up from $1.5 million)
- These amounts have already been increased thanks to inflation adjustments, and for 2016 the lowest penalty is up to $260
Not entirely, but there is some relief for unintentional failures-to-file that are subsequently corrected:
- For returns corrected/filed within 30 days of the due date, the penalty would be reduced to $50 per failure (up from $30 prior to the TPE)
- For returns corrected/filed after 30 days but before August 1st, the penalty would be reduced to $100 (up from $60 prior to the TPE)
The penalty for a willfully failing (meaning the taxpayer disregarded the rules) to file a single information return will get up to $530 in 2016, with no maximum penalty per taxpayer.
With all of these late filing penalties, when are the returns actually due?
- Thanks to another new set of rules, W-2s and most 1099-MISC forms (what you give to your vendors) are due both to payees (vendors, employers, etc.) and to the IRS on January 31
- Other information forms are due to the payee on Jan 31 and due to the IRS on Feb 28 (if paper filed) or March 31 (if E-Filed)