General Instructions For Certain Information Returns (Forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, And W-2g)

Pub. 515 has more information on Form 1042

2. An inconsequential error or omission is not

reporting, partnership withholding on effectively

considered a failure to include correct information. An

TIP

connected income, and dispositions of U.S. real

inconsequential error or omission does not prevent or

property interests by a foreign person.

hinder the IRS from processing the return, from correlating

the information required to be shown on the return with the

Additional information. For more information about

information shown on the payee's tax return, or from

backup withholding, see Pub. 1281.

otherwise putting the return to its intended use. Errors and

omissions that are never inconsequential are those

O. Penalties

related to (a) a TIN, (b) a payee's surname, and (c) any

money amount except as provided, later, with respect to

The following penalties generally apply to the person

the safe harbor for de minimis dollar amount errors.

required to file information returns. The penalties apply to

3. De minimis rule for corrections. Even though you

paper filers as well as to electronic filers.

cannot show reasonable cause, the penalty for failure to

For information on the penalty for failure to file

file correct information returns will not apply to a certain

electronically, see Penalty, earlier, in part F.

number of returns if you:

TIP

a. Filed those information returns timely,

Failure To File Correct Information Returns by

b. Either failed to include all the information required

on a return or included incorrect information, and

the Due Date (Section 6721)

c. Filed corrections by August 1.

If you fail to file a correct information return by the due

date and you cannot show reasonable cause, you may be

4. Safe Harbor for de minimis Dollar Amount Errors,

subject to a penalty. The penalty applies if you fail to file

later.

timely, you fail to include all information required to be

If you meet all the conditions in (a), (b), and (c) above, the

shown on a return, or you include incorrect information on

penalty for filing incorrect returns will not apply to the

a return. The penalty also applies if you file on paper when

greater of 10 information returns or

of 1% of the total

you were required to file electronically, you report an

number of information returns you are required to file for

incorrect TIN or fail to report a TIN, or you fail to file paper

the calendar year.

forms that are machine readable.

Intentional disregard of filing requirements. If any

The amount of the penalty is based on when you file

failure to file a correct information return is due to

the correct information return. The penalty is as follows.

intentional disregard of the filing or correct information

$50 per information return if you correctly file within 30

requirements, the penalty is at least $530 per information

days (by March 30 if the due date is February 28);

return with no maximum penalty.

maximum penalty $536,000 per year ($187,500 for small

businesses, defined below).

Failure To Furnish Correct Payee Statements

$100 per information return if you correctly file more

(Section 6722)

than 30 days after the due date but by August 1;

If you fail to provide correct payee statements and you

maximum penalty $1,609,000 per year ($536,000 for

cannot show reasonable cause, you may be subject to a

small businesses).

penalty. The penalty applies if you fail to provide the

$260 per information return if you file after August 1 or

statement by the due date (January 31 for most returns;

you do not file required information returns; maximum

see the

Guide to Information

Returns, later), you fail to

penalty $3,218,500 per year ($1,072,500 for small

include all information required to be shown on the

businesses).

statement, or you include incorrect information on the

If you do not file corrections and you do not meet

statement. “Payee statement” has the same meaning as

any of the exceptions to the penalty described

“statement to recipient” as used in part M.

later, the penalty is $260 per information return.

CAUTION

The amount of the penalty is based on when you

Small businesses—lower maximum penalties. You

furnish the correct payee statement. It is a separate

are a small business if your average annual gross receipts

penalty, and is applied in the same manner as the penalty

for the 3 most recent tax years (or for the period you were

for failure to file correct information returns by the due

in existence, if shorter) ending before the calendar year in

date (section 6721), described earlier.

which the information returns were due are $5 million or

Exception. An inconsequential error or omission is not

less.

considered a failure to include correct information. An

Exceptions to the penalty. The following are

inconsequential error or omission cannot reasonably be

exceptions to the failure to file penalty.

expected to prevent or hinder the payee from timely

1. The penalty will not apply to any failure that you can

receiving correct information and reporting it on his or her

show was due to reasonable cause and not to willful

income tax return or from otherwise putting the statement

neglect. In general, you must be able to show that your

to its intended use. Errors and omissions that are never

failure was due to an event beyond your control or due to

inconsequential are those relating to (a) a dollar amount,

significant mitigating factors. You must also be able to

except as provided, later, with respect to the safe harbor

show that you acted in a responsible manner and took

for de minimis dollar amount errors, (b) a significant item

steps to avoid the failure.

in a payee's address, (c) the appropriate form for the

information provided (that is, whether the form is an

-18-

Gen. Instr. for Certain Info. Returns (2017)

General Instructions For Certain Information Returns (Forms 1096, 1097, 1098, 1099, 3921, 3922, 5498, And W-2g) - 2017 Page 18

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