The Trade Preferences Extension Act, put in place June 29, 2015, significantly increases penalties for all information returns. This includes Forms W-2, 1099, 1094 and 1095. The penalties increase by 2 1/2 times the prior amount, from $100 per return to $250 per return. The penalties top out at $3,000,000, up from a maximum of $1,500,000. Assuming you catch the omission and late file within 30 days of the original due date the penalty is $50 rather than $250. This is an increase over the previous amount for late filing within 30 days of $30. These penalties are effective for returns due in 2016.
If you find your company is unable to file the information returns on time the IRS will give you an automatic 30 day extension for filing the above forms. Take advantage of this break while you can because in an effort to identify theft and other fraud, final regulations have been passed that eliminate these automatic 30 day extensions for Form W-2 series filings (except Form W-2G) for any forms due after 2016. There may still be relief for forms due in 2017 but it is no longer automatic, the filer must request it and the IRS has said they expect to approve very few of these requests. There are also proposed regulations that would eliminate the current automatic 30 day extension for most of the other information returns such as the W-2G and 1099 series. These proposed regulations, if enacted, will affect the 2018 filing season.
Should you have any questions regarding these possible penalties please contact your LSL Advisor at 714.569.1000.
By: Sherry L. Radmore, CPA
