Penalties for failure to file correct information returns (W-2s, 1099s, 1098s, 1042s) have recently increased per new tax rules implemented effective for returns and statements to be filed after December 31, 2015. These penalties are based on the period of delinquency, the intent, and the size of the taxpayer. An unintentional delinquency per return has increased from $30 to $50 for a period of no more than 30 days. Beyond 30 days would be an additional penalty. The maximum for the calendar year increased from $75,000 to $175,000 for small taxpayers. The maximum penalty would increase from $1.5MM to $3MM for “other than small” taxpayers (i.e. those over $5MM of gross receipts).

With the increase in penalties, businesses will need to be more diligent in their collection of information and ensuring that they understand all reporting requirements. To avoid penalties for incorrect information or late filings:

  • Obtain a completed and signed W-9 from any vendor prior to payment.
  • Obtain employee social security numbers and home addresses prior to the first payroll.
  • Use the IRS TIN (tax identification number) matching system to avoid incorrect tax id numbers.
  • To ensure meeting all specified IRS deadlines, refer to the IRS website and form instructions or hire a qualified professional to generate the required forms.

For further information, please contact your Dean Dorton advisor or Gina Whitis at