26 U.S.C. § 6721 — Failure to file correct information returns
submitted 40 years ago by Pub. L. 99-514 to r/title-26-INTERNAL-REVENUE-CODE · 1,154 words · no verdicts yet
A person who files a late, incomplete, or incorrect information return generally owes $250 per return, with reduced amounts for timely correction and specified caps. Higher penalties apply to intentional disregard, and the section includes de minimis, small-receipt, inflation, and other exceptions.
(a) Imposition of penalty. (1) For a failure in paragraph (2), a person owes $250 for each affected information return*, capped at $3,000,000 for all failures in a calendar year. (2) The failures are (A) not filing by the required date and (B) omitting required information or including incorrect information.
(b) Reduction for correction. (1) If corrected within 30 days after the required filing date*, the penalty is $50 instead of $250 and the yearly cap for those corrections is $500,000. (2) If corrected after 30 days but by August 1 of that calendar year, it is $100 instead of $250 and the cap is $1,500,000.
(c) De minimis failures. (1) If a return is filed, has a failure under (a)(2)(B) after section 6724(a), and is corrected by August 1, it is treated as filed with all correct information. (2) This applies to no more than the greater of 10 returns or one-half of 1 percent of the person’s required returns for the year. (3) No correction is required for an incorrect dollar amount if each error is at most $100 and each tax-withheld error is at most $25; the return is treated as correct. This safe harbor does not apply to an amount covered by an election under section 6722(c)(3)(B), and the Secretary* may issue anti-abuse regulations.
(d) Lower caps for persons with gross receipts of $5,000,000 or less. (1) If (2)’s test is met, replace the caps in (a)(1), (b)(1)(B), and (b)(2)(B) with $1,000,000, $175,000, and $500,000. (2) The test is met if average annual gross receipts for the latest three taxable years before the calendar year do not exceed $5,000,000; section 448(c)(2) and (3) rules apply.
(e) Intentional disregard. For each such failure, (b), (c), and (d) do not apply. The penalty is $500 or, if greater, 10 percent of correctly reportable items for most returns, 5 percent for returns under sections 6045(a), 6050K, or 6050L, the greater of $25,000 or qualifying cash received up to $100,000 for section 6050I(a) transactions, or 10 percent of the contract benefit under section 6050V. The $3,000,000 cap does not apply to this penalty and it is not counted in applying that cap to other penalties.
(f) Inflation. For failures involving returns due after 2014, increase the dollar amounts in (a), (b), (d) except the gross-receipts threshold, and (e) by the stated cost-of-living adjustment under section 1(f)(3), using calendar year 2011 instead of 2016. Round adjusted amounts of at least $75,000 down to a $500 multiple; round other adjusted amounts down to a $10 multiple.
In the case of a failure described in paragraph (2) by any person with respect to an information return*, such person shall pay a penalty of $250 for each return with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $3,000,000.
For purposes of paragraph (1), the failures described in this paragraph are—
any failure to file an information return with the Secretary* on or before the required filing date*, and
any failure to include all of the information required to be shown on the return or the inclusion of incorrect information.
If any failure described in subsection (a)(2) is corrected on or before the day 30 days after the required filing date—
the penalty imposed by subsection (a) shall be $50 in lieu of $250, and
the total amount imposed on the person for all such failures during any calendar year which are so corrected shall not exceed $500,000.
If any failure described in subsection (a)(2) is corrected after the 30th day referred to in paragraph (1) but on or before August 1 of the calendar year in which the required filing date occurs—
the penalty imposed by subsection (a) shall be $100 in lieu of $250, and
the total amount imposed on the person for all such failures during the calendar year which are so corrected shall not exceed $1,500,000.
If—
an information return is filed with the Secretary,
there is a failure described in subsection (a)(2)(B) (determined after the application of section 6724(a)) with respect to such return, and
such failure is corrected on or before August 1 of the calendar year in which the required filing date occurs,
for purposes of this section, such return shall be treated as having been filed with all of the correct required information.
The number of information returns to which paragraph (1) applies for any calendar year shall not exceed the greater of—
10, or
one-half of 1 percent of the total number of information returns required to be filed by the person during the calendar year.
If, with respect to an information return filed with the Secretary—
there are 1 or more failures described in subsection (a)(2)(B) relating to an incorrect dollar amount,
no single amount in error differs from the correct amount by more than $100, and
no single amount reported for tax withheld on the information return differs from the correct amount by more than $25,
then no correction shall be required and, for purposes of this section, such return shall be treated as having been filed with all of the correct required information.
Subparagraph (A) shall not apply with respect to any incorrect dollar amount to the extent that such error relates to an amount with respect to which an election is made under section 6722(c)(3)(B).
The Secretary may issue regulations to prevent the abuse of the safe harbor under this paragraph, including regulations providing that this paragraph shall not apply to the extent necessary to prevent any such abuse.
If any person meets the gross receipts test of paragraph (2) with respect to any calendar year, with respect to failures during such calendar year—
subsection (a)(1) shall be applied by substituting “$1,000,000” for “$3,000,000”,
subsection (b)(1)(B) shall be applied by substituting “$175,000” for “$500,000”, and
subsection (b)(2)(B) shall be applied by substituting “$500,000” for “$1,500,000”.
A person meets the gross receipts test of this paragraph for any calendar year if the average annual gross receipts of such person for the most recent 3 taxable years ending before such calendar year do not exceed $5,000,000.
For purposes of subparagraph (A), the rules of paragraphs (2) and (3) of section 448(c) shall apply.
If 1 or more failures described in subsection (a)(2) are due to intentional disregard of the filing requirement (or the correct information reporting requirement), then, with respect to each such failure—
subsections (b), (c), and (d) shall not apply,
the penalty imposed under subsection (a) shall be $500, or, if greater—
in the case of a return other than a return required under section 6045(a), 6041A(b), 6050H, 6050I, 6050J, 6050K, or 6050L, 10 percent of the aggregate amount of the items required to be reported correctly,
in the case of a return required to be filed by section 6045(a), 6050K, or 6050L, 5 percent of the aggregate amount of the items required to be reported correctly,
in the case of a return required to be filed under section 6050I(a) with respect to any transaction (or related transactions), the greater of—
$25,000, or
the amount of cash (within the meaning of section 6050I(d)) received in such transaction (or related transactions) to the extent the amount of such cash does not exceed $100,000, or
in the case of a return required to be filed under section 6050V, 10 percent of the value of the benefit of any contract with respect to which information is required to be included on the return, and
in the case of any penalty determined under paragraph (2)—
the $3,000,000 limitation under subsection (a) shall not apply, and
such penalty shall not be taken into account in applying such limitation (or any similar limitation under subsection (b)) to penalties not determined under paragraph (2).
In the case of any failure relating to a return required to be filed in a calendar year beginning after 2014, each of the dollar amounts under subsections (a), (b), (d) (other than paragraph (2)(A) thereof), and (e) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year determined by substituting “calendar year 2011” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any amount adjusted under paragraph (1)—
is not less than $75,000 and is not a multiple of $500, such amount shall be rounded to the next lowest multiple of $500, and
is not described in subparagraph (A) and is not a multiple of $10, such amount shall be rounded to the next lowest multiple of $10.
Source credit: (Added Pub. L. 99–514, title XV, § 1501(a), Oct. 22, 1986, 100 Stat. 2732; amended Pub. L. 100–690, title VII, § 7601(a)(2)(A), Nov. 18, 1988, 102 Stat. 4503; Pub. L. 101–239, title VII, § 7711(a), Dec. 19, 1989, 103 Stat. 2388; Pub. L. 101–508, title XI, § 11318(b), Nov. 5, 1990, 104 Stat. 1388–459; Pub. L. 109–280, title XII, § 1211(b)(2), Aug. 17, 2006, 120 Stat. 1073; Pub. L. 111–240, title II, § 2102(a)–(f), Sept. 27, 2010, 124 Stat. 2561, 2562; Pub. L. 113–295, div. B, title II, § 208(f), Dec. 19, 2014, 128 Stat. 4074; Pub. L. 114–27, title VIII, § 806(a)–(d), June 29, 2015, 129 Stat. 416, 417; Pub. L. 114–113, div. Q, title II, § 202(a), (d), Dec. 18, 2015, 129 Stat. 3076, 3077; Pub. L. 115–97, title I, § 11002(d)(1)(PP), Dec. 22, 2017, 131 Stat. 2061; Pub. L. 115–141, div. U, title I, § 101(f)(2), title IV, § 401(a)(299)(F), Mar. 23, 2018, 132 Stat. 1161, 1198.)
- 1986Enacted · Pub. L. 99-514 · 100 Stat. 2732
- 1988Amended · Pub. L. 100-690 · 102 Stat. 4503
- 1989Amended · Pub. L. 101-239 · 103 Stat. 2388
- 1990Amended · Pub. L. 101-508 · 104 Stat. 1388
- 2006Amended · Pub. L. 109-280 · 120 Stat. 1073
- 2010Amended · Pub. L. 111-240 · 124 Stat. 2561, 2562
- 2014Amended · Pub. L. 113-295 · 128 Stat. 4074
- 2015Amended · Pub. L. 114-27 · 129 Stat. 416, 417
- 2015Amended · Pub. L. 114-113 · 129 Stat. 3076, 3077
- 2017Amended · Pub. L. 115-97 · 131 Stat. 2061
- 2018Amended · Pub. L. 115-141 · 132 Stat. 1161, 1198
A history note hasn’t been published yet. The record shows enactment by Pub. L. 99-514 on 1986-10-22.
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