Failure to furnish informational statements and returns such as Forms W-3, W-2, 1096, 1099, and 1098 (just to name a few) has, in the past, been subject to significant fines. For the 2015
reporting year, those fines have become even more significant. Such penalties are levied for both failing to file information returns with the IRS and for failing to furnish a copy to a payee.
Beginning in 2015, penalties for failure to furnish informational statements will also apply to Forms 1094 and 1095, which are forms used for reporting of health plan coverage.
How much will the penalty increase for forms and information returns which are not filed?
The Trade Preferences Extension Act of 2015 (the “Act”) increases the penalty from $200 to $500 per violation, or $250 for each IRS and payee copy not filed or furnished to the
recipient, respectively. The penalty exposure will typically be $500 per form because the same error usually occurs on both the IRS and payee copies. The penalty for intentionally failing to
file, increases from $500 to $1,000 per violation.
The maximum total penalty charge can be $1.5 million per calendar year for failure to file and another $1.5 million for failure to furnish. It is important to note that the penalties also apply to
timely filings with incorrect information.
While the IRS has, under certain circumstances, waived these penalties on occasion, it is important for you to review your practices and procedures related to tax informational reporting,
including the classification of workers as employees or independent contractors. All employers should have a plan in place for how to fulfill their Form 1095 filing requirements under the
Affordable Care Act since these penalties apply to the 2015 information returns that are due in 2016.
If you have any questions, please contact us at 847.441.8800.