Penalties for Failure to File or Furnish Information Returns

Tax law requires businesses to provide information returns, such as 1099-MISCs, to each payee that the business has paid $600 or more for the year.  The law also includes penalties for failure to file the same information returns with the IRS.

To ensure compliance with these requirements, there are substantial penalties.  The penalties are generally based upon how late the returns are filed with the IRS or provided to the recipient of the income and are broken down into three tiers:

Tier 1 – Where the returns are filed or provided late but within 30 days of the prescribed due date.

Tier 2 – Where the returns are filed or provided more than 30 days after the prescribed due date and before August 1 of the calendar year in which the filing was required.

Tier 3 – Where the returns are filed or provided after August 1 of the calendar year in which the filing was required.

In addition, the maximum penalties for the year are based on business size determined by the business’s gross receipts.  Businesses with gross receipts of $5 million or less are subject to the small business penalty maximums.

The following table shows the penalties for information returns imposed for returns required to be filed after January 1, 2011.

	Small Businesses	General
Tier 1	$15 (Max $25,000)	$30 (Max $250,000)
Tier 2	$30 (Max $50,000)	$60 (Max $500,000)
Tier 3	$50 (Max $100,000)	$100 (Max $1,500,000)

*To be inflation-adjusted every 5 years, with the first adjustment occurring in 2017

In addition, the minimum penalty for each intentional failure-to-file act is $250, with no maximum limit.