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New Penalties Increases for 2016
Posted on December 27th, 2016 in Uncategorized

New Penalties Increases for 2016

As 2016 comes to an end, most business owners are thinking about holiday parties, purchasing those last-minute gifts and taking time off to spend with family and friends. When we finally get back to the office on January 2nd we are faced with a mountain of emails that need replies and tasks that have been over looked for the last few weeks.  It is about this time that your accountant also tries to contact you to request information to begin filing various state and federal tax documents.  Now traditionally, you might have delayed returning the call for a week or two while you either get caught up on your bookkeeping or scramble to find all those 2016 receipts so your bookkeeper can finish the books.

Filing some of those documents in 2017 will take on a new sense of urgency as many filling deadlines have be shortened to help combat tax fraud. At the same time Congress, has increased the penalties for non-filing and late filing of various informational reporting forms to both the IRS and to end recipients.  Together the shortened deadlines and increase penalties have created a potential trap for uninformed business owners and their accountants.

Here is why filing on time is important in 2017.

On June 29 2015 Congress passed The Trade Preferences Extension Act of 2015, which on the surface addressed trade with sub-Saharan African. What was not known to the general public is that the bill also included measures increasing the penalties for non-filing, late filing and even data errors on information reporting forms like the W-2, W-3 and 1099 series forms as well as the healthcare forms 1095c as well as the new 1094c filed on or after January 1st 2017.

Here is the summary of the changes for each of the documents effected by The Trade Preferences Extension Act of 2015.

Penalty Change Summary

Reason for Penalty Previous Penalty New Penalty
All Intentionally disregarding to file – all businesses $250 – per document No cap $500 – per document No cap
Small Businesses – Rev < $5,000,000 Failing to file or furnish to end users. $100 – per document $500,000 cap $250 – per document $1,000,000 cap
Filling within 30 days of the due date. $30 – per document $75,000 cap $50 – per document $175,000 cap
Filling late but by Aug 1st of the year due. $60 – per document $200,000 cap $100 – per document $500,000 cap
Large Businesses – Rev > $5,000,000 Failing to file or furnish to end users. $100 – per document $1,500,000 cap $250 – per document $3,000,000 cap
Filling within 30 days of the due date. $30 – per document $250,000 cap $50 – per document $500,000 cap
Filling late but by Aug 1st of the year due. $60 – per document $500,000 cap $100 – per document $1,500,000 cap

 

In the past many accountants, would file an automatic extension to give their clients the time they needed to get their financial records together. Unfortunately, this option is no longer available because in 2017 the IRS will no longer give automatic extensions to file forms W-2, W-3, 1099 series forms, 1095c and 1094c.  While an extension request may be filed, the IRS will only grant the extension where extraordinary circumstances exist or natural disasters / catastrophes make filing on time unreasonable.  Thus, W2s and 1099s with entries in Box 7 are due on January 31, 2017 barring a natural disaster.

Many accountants and business owners have been late in the past and never received a penalty from the IRS for it. While this has been true in the past the Treasurer Inspector General for Tax Administration (TIGIA), a department of the Treasury Department released a report stating that the IRS needed to do a better job of perusing non-filers.  The TIGIA audited roughly 1.9 million non-filling tax payers from 2012 and 2013 and found that the lack of pursuit resulted in an estimated $7.4 billion in unpaid taxes.  The IRS announced plans to start using outside collection agencies to supplement their internal collections activities as early as Spring 2017.  So, with pressures to peruse tax revenue it is only a matter of time before the IRS starts to apply and pursue penalties for late and amended filling.


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