IRS Releases Proposed Regulations Addressing De Minimis Errors in Certain Information Returns and Statements

On Oct. 17, 2018, the IRS issued proposed regulations relating to the de minimis error safe harbor exceptions to penalties for failure to file correct information returns or furnish correct payee statements under IRC sections 6721 and 6722. These proposed regulations are consistent with prior guidance on the safe harbor included on page five of the final instructions to Forms 1094/1095-C, which were reported on in our Oct. 16, 2018 edition of Compliance Corner.

As background, the penalties apply when a person is required to file an information return or furnish a payee statement but the person fails to do so on or before the prescribed date, fails to include all of the information required to be shown or includes incorrect information.

Under the safe harbor, an error on an information return or payee statement is not required to be corrected, and no penalty is imposed, if the error relates to an incorrect dollar amount and the error differs from the correct amount by no more than $100 ($25 in the case of an error with respect to an amount of tax withheld). The information return or payee statement must be otherwise correct and timely filed or furnished on time. The safe harbor does not apply in cases of intentional disregard of the requirements to file or furnish correct information returns or payee statements. Further, the proposed regulations highlight the fact that the safe harbor does not apply if the payee elects in writing to receive a corrected statement.

Finally, the proposed regulations update the penalty amounts to reflect legislative increases and adjustments for inflation. Employers may be interested in the de minimis error safe harbor exceptions to penalties, because it applies to information reported on Forms W-2, 1094/1095-C, and 1099-R.

Proposed IRS Regulations »