Instructions For Forms 1099-Sa And 5498-Sa - 2006 (Page 17 of 25) in pdf

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$30 per information return if you correctly file more than 30

provided (that is, whether the form is an acceptable substitute

days after the due date but by August 1; maximum penalty

for the official IRS form), and (d) whether the statement was

$150,000 per year ($50,000 for small businesses).

furnished in person or by “statement mailing,” when required.

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$50 per information return if you file after August 1 or you do

Intentional disregard of payee statement requirements. If

not file required information returns; maximum penalty

any failure to provide a correct payee statement is due to

$250,000 per year ($100,000 for small businesses).

intentional disregard of the requirements to furnish a correct

payee statement, the penalty is at least $100 per payee

If you do not file corrections and you do not meet any of

statement with no maximum penalty.

the exceptions to the penalty described on page GEN-6,

the penalty is $50 per information return.

Forms 1099-Q, 1099-SA, 5498, 5498-ESA, and

CAUTION

5498-SA (Section 6693)

Small businesses — lower maximum penalties. You are a

small business if your average annual gross receipts for the 3

The penalties under sections 6721 and 6722 do not apply to:

most recent tax years (or for the period you were in existence, if

shorter) ending before the calendar year in which the

Forms

Filed Under Code Section

information returns were due are $5 million or less.

1099-SA and 5498-SA

220(h) and 223(h)

Exceptions to the penalty. The following are exceptions to

the failure to file penalty.

5498

408(i) and 408(l)

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

5498-ESA

530(h)

show was due to reasonable cause and not to willful neglect. In

1099-Q

529(d) and 530(h)

general, you must be able to show that your failure was due to

an event beyond your control or due to significant mitigating

factors. You must also be able to show that you acted in a

The penalty for failure to timely file Forms 1099-SA,

responsible manner and took steps to avoid the failure.

5498-SA, 5498, 5498-ESA, or 1099-Q is $50 per return with no

2. An inconsequential error or omission is not considered a

maximum, unless the failure is due to reasonable cause. See

failure to include correct information. An inconsequential error

section 6693.

or omission does not prevent or hinder the IRS from processing

Fraudulent Acknowledgments With Respect to

the return, from correlating the information required to be shown

Donations of Motor Vehicles, Boats, and

on the return with the information shown on the payee’s tax

return, or from otherwise putting the return to its intended use.

Airplanes (Section 6720)

Errors and omissions that are never inconsequential are those

If you are required under section 170(f)(12)(A) to furnish a

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

contemporaneous written acknowledgment to a donor and you

amount.

knowingly furnish a false or fraudulent Form 1098-C, or

3. De minimus rule for corrections. Even though you cannot

knowingly fail to furnish a Form 1098-C within the applicable

show reasonable cause, the penalty for failure to file correct

30-day period, you may be subject to a penalty. See the 2006

information returns will not apply to a certain number of returns

Instructions for Form 1098-C for more detailed information.

if you:

Civil Damages for Fraudulent Filing of

a. Filed those information returns,

Information Returns (Section 7434)

b. Either failed to include all the information required on a

return or included incorrect information, and

If you willfully file a fraudulent information return for payments

c. Filed corrections by August 1.

you claim you made to another person, that person may be able

to sue you for damages. You may have to pay $5,000 or more.

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

for filing incorrect returns (but not for filing late) will not apply to

the greater of 10 information returns or

of 1% of the total

P. Payments to Corporations and

number of information returns you are required to file for the

calendar year.

Partnerships

Intentional disregard of filing requirements. If any failure to

Generally, payments to corporations are not reportable.

file a correct information return is due to intentional disregard of

However, you must report payments to corporations for the

the filing or correct information requirements, the penalty is at

following.

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least $100 per information return with no maximum penalty.

Medical and health care payments (Form 1099-MISC),

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Withheld federal income tax or foreign tax,

Failure To Furnish Correct Payee Statements

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Barter exchange transactions (Form 1099-B),

(Section 6722)

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Substitute payments in lieu of dividends and tax-exempt

If you fail to provide correct payee statements and you cannot

interest (Form 1099-MISC),

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show reasonable cause, you may be subject to a penalty. The

Interest or original issue discount paid or accrued to a regular

penalty applies if you fail to provide the statement by January

interest holder of a REMIC (Form 1099-INT or 1099-OID),

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31 (see part M on page GEN-9), you fail to include all

Acquisitions or abandonments of secured property (Form

information required to be shown on the statement, or you

1099-A),

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include incorrect information on the statement. “Payee

Cancellation of debt (Form 1099-C),

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statement” has the same meaning as “statement to recipient” as

Payments of attorneys’ fees and gross proceeds paid to

used in part M on page GEN-9.

attorneys (Form 1099-MISC),

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The penalty is $50 per statement, no matter when the

Fish purchases for cash (Form 1099-MISC),

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correct statement is furnished, with a maximum of $100,000 per

The credit for clean renewable energy bonds and the credit

year. The penalty is not reduced for furnishing a correct

for Gulf bonds treated as interest and reported on Form

statement by August 1.

1099-INT, and

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Federal executive agency payments for services (Form

Exception. An inconsequential error or omission is not

1099-MISC). For additional reporting requirements, see Rev.

considered a failure to include correct information. An

Rul. 2003-66 that is on page 1115 of Internal Revenue Bulletin

inconsequential error or omission cannot reasonably be

2003-26 at

expected to prevent or hinder the payee from timely receiving

correct information and reporting it on his or her income tax

Reporting generally is required for all payments to

return or from otherwise putting the statement to its intended

partnerships. For example, payments of $600 or more made in

use. Errors and omissions that are never inconsequential are

the course of your trade or business to an architectural firm that

those relating to (a) a dollar amount, (b) a significant item in a

is a partnership are reportable on Form 1099-MISC. However,

payee’s address, (c) the appropriate form for the information

see Regulations section 1.6049-4(c)(1)(ii)(A).

GEN-13

Instructions For Forms 1099-Sa And 5498-Sa - 2006 Page 17

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