Date: February 18, 2016
On Jan. 11, 2016, the IRS released Rev. Proc. 2016-11, which included the inflation-adjusted penalty amounts for failure to file information returns.
Among other things, the Act increased the penalties that can be levied upon entities who fail to comply with the PPACA reporting requirements. As background, PPACA requires certain informational reporting to the IRS and to plan participants under IRC Sections 6055 and 6056.
Specifically, the Act increased the penalty for failure to file a required information return with the IRS to $250 per return, a $150 increase from the previous penalty of $100 per return. The Act also doubled the cap on the total amount of penalties during a calendar year from $1,500,000 to $3,000,000. Further, if the failures to file result in a failure on both the information return (transmittal filed with the IRS) and on the individual statement (statement distributed to employees), then the penalties are doubled. The penalties are also doubled to $500 for each failure if the failure to file is caused by intentional disregard on the part of the entity responsible for filing. In the case of intentional disregard, there is no cap on the amount of penalties that can be imposed.
The increased penalties also apply to Forms W-2 and other information returns and filings, and they are effective on reporting that is required to be filed after 2015. Keep in mind, though, that this Act does not change the IRS’s enforcement of the first year of reporting for Sections 6055 and 6056. It still will not penalize employers who have made a good faith effort to comply with the reporting requirements in 2016. However, if the IRS finds that a good faith effort was not made, it could impose the newly increased penalties.