Higher penalties for information returns, courtesy of IRS

Remind Finance to stay sharp! IRS recently sent out its latest round of notices with proposed penalties for information return errors.

And if any of these pesky 972CG notices arrive in your team’s mail pile, you should know IRS has increased some of the penalties.

Specifically, the penalty rates for returns filed or furnished in 2020 are:

• $50 each if filed within 30 days late
• $110 each if filed more than 30 days late but before or on Aug. 1 (up from $100)
• $270 each if filed after Aug. 1 or not filed at all, and
• $550 each for intentional disregard to file (up from $540).

Be vigilant, act fast

Now more than ever, companies can’t afford to shell out hundreds or even thousands of dollars to IRS for information return errors. And these higher penalties provide good incentive for your finance team to keep a close eye out for notices – and act quickly on them.

Encourage your team to notify you if any 972CGs arrive in the mail, so you can together analyze the information provided by IRS. And it could be beneficial to remind your team that these are only proposed penalties. You have the right to contest those your company feels are unreasonable, using the response page included in the notice.

If you do contest penalties, the objective of your explanation is to show reasonable cause rather than willful neglect, explain the experts at InvoiceInfo. Some examples of reasonable cause that could help your argument include:

• it’s the first time your company had to file a certain information return
• the error was the result of events beyond your control (e.g., computer crash), or
• you used a third party, and something interfered with their ability to file.

And if your company has a long history of accuracy and compliance with IRS, noting that couldn’t hurt either.

All in all, if your response to proposed penalties is professional, clear and includes solid evidence of your company’s good faith, IRS may reduce penalties or waive them altogether.