Wednesday, April 15, 2015

New Act Increases Penalties for Errors on Information Returns

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Payroll professionals might need to take some extra time to make sure their Forms W-2 are correct because penalty amounts for incorrect forms are going up. The Trade Preferences Extension Act of 2015, signed into law earlier this summer, includes provisions that increase penalties for errors on information returns and payee statements, such as Forms W-2 and 1099.

The increased penalties are applicable to information returns and payee statements required to be filed or furnished after December 31, 2015. This includes 2015 forms filed in early 2016. The law also adjusts penalties for failure to file correct information returns and failure to furnish correct payee statements.

Under the new law the penalty changes are as follows:

  • Per form penalty of $100 increased to $250
  • Calendar year penalty limit increased from $1.5 million to $3 million
  • For corrections made within 30 days after the filing deadline, the penalty increased from $30 to $50
  • Maximum calendar year limit increased from $250,000 to $500,000
  • For forms and statements corrected on or before August 1, the penalty increased from $60 to $100
  • Maximum calendar year limit increased from $500,000 to $1.5 million

There are also increases to maximum penalty amounts for businesses with gross receipts of up to $5 million. Those increases are:

  • Calendar year penalty limit increased from $500,000 to $1 million
  • If the forms are corrected within 30 days, the maximum calendar year penalty increased from $75,000 to $175,000
  • For forms corrected on or before August 1, the maximum calendar year penalty increased from $200,000 to $500,000
  • Per-form penalty of $250 for intentional disregard also increases to $500 per form

Read the August issue of Payroll Currently for more details on the Trade Preferences Extension Act of 2015.