Avoiding Information Return Penalties

Information returns, such as W-2s and 1099s, are a crucial aspect of year-end planning. Accurate and timely filing of these forms is essential to ensure your organization's compliance with tax regulations. Failure to file these forms correctly can result in significant penalties. These penalties can include late submissions and missed deadlines, as well as inaccuracies in the information provided or missing information.

Ensuring the proper completion and submission of these forms is not only a matter of regulatory compliance, but can also play a vital role in preventing potential financial setbacks for your organization when penalties are large. To help you avoid penalties, we’ve outlined the instances when you may receive a penalty as a taxpayer.

Types of Information Return Penalties

There are two separate penalties your business can face for information returns.

1. Penalty for not filing correct information returns

This penalty may apply to you if you:

• Didn’t file by the necessary due date and you don’t show reasonable cause for why your return was late
• Were supposed to file electronically, but you filed on paper instead
• Didn’t report a Tax Identification Number (TIN) or reported an incorrect TIN
• Filed paper forms that weren’t machine readable

2. Penalty for not providing correct payee statements

This penalty may apply to you if you:

• Didn’t provide correct payee statements by the necessary date and don’t show reasonable cause for why you missed the deadline
• Didn’t provide all the necessary information on the statement
• Provided incorrect information on the statement

While No Tax is Due, Information Return Penalties Can Be Significant

Information return penalties will vary depending on when the return was due, how late it was filed, and if you intentionally did not file a form.

Check out this infographic to learn more about how much these 1099 penalties will cost you.

Filing Requirements You Should Know About

There are several types of information returns that may be required to be filed by your business. Filling out the correct information takes time. Be sure to walk through each form and box to confirm you have the correct information listed for that specific section.

Here are the different information reporting filing requirements for the most common forms:

Avoid Information Return Penalties with Effective Year-End Planning

Information return penalties are not to be taken lightly. Their importance lies in the meticulous nature of form completion, the potential financial consequences of non-compliance, and the need for strict adherence to submission deadlines to avoid penalties and other complications.

Properly handling these information returns is a fundamental component of effective year-end planning and maintaining the financial health of your organization. Additionally, the assessment process for these taxes requires vigilant attention to detail. This involves evaluating your financial activities and ensuring that all obligations are accurately reported and paid to the federal government.

If you need help, Eide Bailly’s experienced advisors can offer the support you need to prepare for year-end and avoid costly information return penalties.