How Information Return Penalties Will Affect Your Year-End Planning

Information returns, including W-2s and 1099s, are an important piece of year-end planning. If these forms are not filed correctly, there can be substantial penalties for your organization.

These penalties include late filing or missed deadlines, incorrect submission of information or missing information.

Why Information Return Penalties Occur
There are two separate penalties your business can face.

1. Penalties for not filing correct information returns may apply to you if:

• You didn’t file by the necessary due date and you don’t show reasonable cause for why your return was late.
• You were supposed to file electronically, but you filed on paper instead.
• You didn’t report a Tax Identification Number (TIN) or reported an incorrect TIN.
• You file paper forms that aren’t machine readable. 

2. Penalties for not providing correct payee statements may apply to you if:

• You didn’t provide correct payee statements by the necessary date and don’t show reasonable cause for why you missed the deadline.
• You didn’t provide all the necessary information on the statement.
• You provided incorrect information on the statement.

Preventing Information Return Penalties from Occurring
There are different filing requirements based on what type of form you’re filing.

W-2 and W-3
Employers must send Copy A of Forms W-2 and W-3 to the Social Security Administration by January 31. This is for both paper and electronic forms.

Employers must give Copy B and any other applicable copies to the employee by January 31.

1099-MISC
Businesses must send Copy A of Form 1099-MISC to the IRS by:

• January 31 of the following year when you’re reporting non-employee compensation payments in Box 7.
• February 28 if filing by paper when you’re NOT reporting non-employee compensation in Box 7.
• March 31 if filing electronically when you’re NOTreporting non-employee compensation in Box 7.

Filling out the correct information takes time. Make sure to walk through each box and ensure you have the correct information listed for that specific section.

What an Information Return Penalty Could Cost You
Information return penalties depend on when the return was due, how late it is and the size of your business based on gross receipts.

Why Information Return Penalties Matter
These forms can’t be rushed. They take time to fill out, and there can be substantial penalties for not filling them out correctly and not submitting them to the proper parties by the necessary due dates.