IRS announces maximum failure to report penalty amounts on late field 2023 returns

IRS announces maximum failure to report penalty amounts on late field 2023 returns

The IRS has announced the penalty amounts for failure to file correct 2023 information returns, and failure to furnish correct 2023 payee statements in 2024.

IRS Code 6721 imposes a penalty on a taxpayer for failing to file a correct information return (any 1099 series form or a Form W-2). Code 6722 imposes a penalty for failure to furnish a payee statement (employee’s copy of Form W-2, recipient’s Form 1099) on time, failure to include all information required to be shown on the statement or including incorrect information. The maximum penalty is lower if the taxpayer is a small business. A small business is a taxpayer with average annual gross receipts for the most recent three tax years of $5 million or less.

The amount of the penalty depends on when the return or statement is corrected.

  • The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are corrected within 30 days, is $60 per return/statement (currently $50), up to a maximum penalty of $630,500 ($220,500 for small businesses). The maximum penalty is $588,500 on 2022 information returns and payee statements ($206,000 for small businesses).
  • The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are corrected later than 30 days after the due date but before August 1st, is $120 per return/statement (currently $110), up to a maximum penalty of $1,891,500 ($630,500 for small businesses). The maximum penalty is $1,766,000 on 2022 information returns and payee statements ($588,500 for small businesses).
  • The penalty on 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, that are not corrected by August 1 (or if no return or statement is filed at all), is $310 per return/statement ($290 for 2022 information returns), up to a maximum penalty of $3,783,000 ($1,891,500 for small businesses). The maximum penalty is $3,532,500 on 2022 information returns and payee statements ($1,177,500 for small businesses).

Intentional disregard penalty: The intentional disregard penalty for 2023 information returns required to be filed in 2024, and 2023 payee statements required to be furnished in 2024, is $630 per return/statement, or if greater, 10% of the amount required to be shown on the return/statement (without any limit on the maximum penalty in a calendar year). The intentional disregard penalty for 2022 information returns required to be filed in 2023, and 2022 payee statements required to be furnished in 2023, is $580 per return/statement, or if greater, 10% of the amount required to be shown on the return/statement (without any limit on the maximum penalty in a calendar year).

Lastly, for tax returns filed in 2023, the minimum penalty for failure to file a tax return within 60 days of the due date is $485 ($450 for tax returns filed in 2022).

Source: Thomson Reuters

IRS announces maximum failure to report penalty amounts on late field 2023 returns

IRS tax deposit publication updated for 2023

The IRS has updated Notice 931 (Deposit Requirements for Employment Taxes) to include the tax deposit rules for the 2023 year.

The deposit schedule employers must use (i.e., monthly or semi-weekly) is based on the total tax liability they reported during the lookback period. For employers filing Form 941 (Employer’s Quarterly Federal Tax Return), an employer’s deposit schedule for 2023 is based on the lookback period beginning July 1, 2021 and ending June 30, 2022. An employer reporting $50,000 or less of Form 941 taxes for the lookback period is a monthly depositor, and an employer reporting more than $50,000 of Form 941 taxes is a semiweekly depositor.

An employer with a Form 941 tax liability of less than $2,500 during the current or preceding quarter, who does not incur a $100,000 next-day deposit obligation during the current quarter, is not required to make monthly or semiweekly deposits if the taxes are paid in full with a timely filed return. An employer accumulating a tax liability of $100,000 or more on any day during a deposit period must deposit the tax by the next “business day,” regardless of whether the employer is a monthly or semiweekly depositor. A “business day” is any day other than a Saturday, Sunday, or a “legal holiday.” The term “legal holiday” means any legal holiday in the District of Columbia.

The IRS considers a new employer’s tax liability to be zero, which makes a new employer a monthly depositor for the first year of business.

The lookback period for annual return filers (Forms 943, 944, 945, or CT-1) is the calendar year preceding the previous year. The lookback period for 2023 tax deposits is the 2020 tax year.

Adjustments: The lookback period is based on the tax liability as originally reported. If an employer subsequently files Form 941-X, 943-X, 944-X, 945-X, or CT-1X to correct errors on the original return, the corrections are not taken into consideration for purposes of the lookback period computation.

Source: Thomson Reuters

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