You’re not out of the 2013 woods yet. In a Program Manager Technical Advice memorandum, the IRS explains that if you fail to provide employees with Forms W-2 and payees with Forms 1099, you can be socked with a penalty. Fail to file those forms with the appropriate agency and you can be socked with another penalty. And filing a transmittal Form W-3 or Form 1096 without W-2s or 1099s attached won’t get you off any penalty hook. Knock, knock: This is your last, best opportunity to ensure that your 2013 forms are completed properly. (PMTA 2013-004)
How the IRS thinks about penalty assessments
Tax code Section 6721 provides penalties for failing to file correct information returns; Section 6722 provides penalties for failing to furnish correct statements to payees. Penalties apply if the returns are furnished or filed incomplete, with inaccuracies, late or not at all.
The IRS encountered two problems with these code sections—neither imposes an assessment period nor defines what a “return” is. IRS: Since neither section imposes a specific assessment period, the general period applies to penalty assessments: three years from the date the return was filed. Flip side: If no return is filed, the assessment period never begins to run. Upshot: The IRS has an unlimited amount of time to assess penalties.
As for the return against which penalties may be assessed, the IRS concluded that it must contain the payee’s name and address, as well as other required data elements. IRS: For the term “return” to be read consistently, it must mean each properly filed information return. A naked summary or transmittal form, such as the W-3 or 1096, doesn’t contain the requisite data elements required for a return. The assessment period, therefore, would never begin to run.
PRACTICE TIP: It’s not too late to review your W-2s before filing them. If it’s necessary to correct a W-2 before you file with the Social Security Administration, mark the Void box on Copy A of the original form and prepare a new form for the employee. Then, file the new form by the end of this month, or next month, if you’re e-filing. Be sure to write CORRECTED on Copies B, C and 2 of the employee’s form.