Melville, New York (PRWEB) December 07, 2012
Businesses required to file information returns (1098, 1099, 3921, 3922, 5498, W-2G) and/or annual wage reports (W-2, W-2C) should be aware of the penalties under §6721 and §6722 of the Internal Revenue Code (IRC). Although small businesses may experience a lower maximum penalty, the net penalty can be devastating.
Under IRC §6721, a penalty may be assessed for failure to file correct information returns by the due date, without reasonable cause. The penalty also applies for filing on paper when required to file electronically, for reporting an incorrect taxpayer identification number (TIN), or for failing to file forms that are machine readable.
Penalties under §6721 are as follows:
$30 per information return, if correctly filed within 30 days (by March 30 if the due date is February 28); maximum penalty $250,000 per year ($75,000 for small businesses).
$60 per information return, if correctly filed more than 30 days after the due date but by August 1; maximum penalty $500,000 per year ($200,000 for small businesses).
$100 per information return filed after August 1 or not filed at all; maximum penalty $1,500,000 per year ($500,000 for small businesses).
Under IRC §6722, a penalty applies for failure to provide the statement by January 31 (February 15 for Forms 1099-B, 1099-S, and 1099-MISC (boxes 8 and 14 only)), for failure to include all information required to be shown on the statement, or for failure to include correct information on the statement. Although this is a separate penalty, it is applied in the same manner as penalties under §6721.
Failure to report a correct taxpayer identification number is subject to a penalty under §6721 and §6722. In an effort to help filers comply, the Internal Revenue Service’s TIN Matching Program was established. Prior to filing an information return, a Program participant may check the TIN furnished by the payee against the name/TIN combination contained in the Internal Revenue Service database maintained for the Program.
The IRS Office of Electronic Tax Administration offers two TIN Matching options:
Interactive TIN Matching - This process accepts up to 25 input name/TIN combination requests online. Results are returned to the user in real time.
Bulk TIN Matching - This process accepts electronic transmittal files containing up to 100,000 name/TIN combinations for matching. Results are returned in electronic response files.
Integrated Data Management Systems, Inc. (IDMS), a leading provider of 1099 and W-2 software, considers Bulk TIN Matching to be an integral component of its Account Ability Tax Form Preparation software, which is why they have included it for free.
Account Ability is a robust network ready software package which, together with its entire database, resides on your computer or network server, not that of some online service. Therefore, users can enter as many returns as desired without ever incurring extra charges, as is common with most online processing systems. Account Ability also includes electronic reporting (eFile), electronic delivery (eDeliver) and plain paper filing for the entire family of information returns (1098, 1099, 3921, 3922, 5498, W-2G) and annual wage reports (W-2, W-2C).
Southern Payrolls, Inc., an Account Ability user, had this to say: "I just wanted to take a minute to thank you for all of the assistance you have provided since last August when we began testing Account Ability. Having completed our busy season of W-2 and 1099 processing, I can conclusively say you have a great product, and my only regret is that we didn't discover you earlier."
During the past 25 years, more than 100,000 tax professionals have used Account Ability to file their information returns (1098, 1099, 3921, 3922, 5498, W-2G) and annual wage reports (W-2, W-2C).
As its motto states: "We are known by the companies we keep." Its client roster includes: American Express; University of Notre Dame; Sunsweet; H&R Block; New York State Comptroller's Office; Salvation Army; Virgin Atlantic; Lockheed Martin; Northrop Grumman; D.F.A.S.; NAACP; and many more.
Watch our 2 minute presentation on YouTube to learn more about Account Ability