Importance of accurate information returns.
Author | Rocen, Don |
The IRS receives approximately 1.1 billion information returns per year. Most of these are received on magnetic tape and processed in Martinsburg, West Virginia. The sheer volume of information returns has caused the Service to place a greater emphasis on the timely filing of correct information returns. The information contained in the forms in the 1099 series and Form 1098, Mortgage Interest Statement, and in other information returns is entered into an IRS master file and posted to the account of the taxpayer identified on the return. This information is used by the Service to verify the reporting of income and deductions on individual tax returns.
Over the past 10 years, the Service has begun to rely more on information reporting and its related compliance programs. The IRS regards the improvement of accuracy and timeliness of the reported information as crucial to its efforts. In this connection, Congress has enacted a series of legislative provisions that support information reporting.
Sanctions for noncompliance can be very expensive. Penalties for late filing of information returns are tiered. A penalty of $15 per return is assessed for returns received within 30 days after February 28. Each return received after the 30-day period, but before August 1, is assessed a $30 penalty. The penalty increases to $50 per return after August 1.
The same penalty structure applies to failures to provide statements to payees. Thus, if a payer does not provide an information return to the Service and a statement to the payee by August of the year following the transaction, the payer could incur $100 in penalties. There is an annual cap of $250,000 on penalties imposed for failures to send information returns to the IRS and an annual cap of $100,000 on penalties resulting from failures to provide statements to payees. When the Service asserts intentional disregard of the rules, significantly higher penalties could result.
If an information return is timely filed, and it is later determined to be incorrect, a corrected copy can be submitted. As with original...
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