The IRS have set rules and compliance for your tax filing, failing which they have also set the penalties that you will be liable for. Penalties are something that everyone wants to avoid with their tax reporting and for certain reasons penalties can never be avoided. In some cases, the IRS also exempts from penalties.
Here is what you need to know about penalties charged for Form W2, 1099, and 941.
Why do you receive penalties?
Basically, the IRS charges penalties for two reasons.
- Failing to pay your tax on time
- Failing to file your information returns on time
Failing to file your information returns on time
With the season of filing information returns, let’s get to know more about the penalties charged for failures met with filing Form W2/1099.
It is the responsibility of the employers/payers to file W2/1099 to the SSA/IRS on time and with correct information furnished. They are also responsible to send the employee/payees copies on time with correct information. The IRS imposes penalties for missing out major information.
Reasons for receiving W-2/1099 penalties
Here is the list of reasons why you may receive penalties from the IRS for failing to file w2 form with correct information on time and you cannot show any reasonable cause for failure to file. The penalties apply for both paper and e-filing and the charges are the same.
- Failing to pay on time
- Failing to provide necessary information
- Failing to report TIN
- Failing to include all the necessary information needed
- Filing with incorrect information
- Reporting an incorrect TIN
- Filing with incorrect information
- Incorrect filing method
- Filing on paper when needed to e-file
- Filing with paper that are not machine readable
- Failing to furnish correct payee copies
- For Fraudulent filing of Form W2/1099
What are the penalty rates for W-2/1099?
| Time limit | Minimum | Maximum |
| Filed within 30 days | $50/form | $556,500 per year ($194,500 for small businesses) |
| After 30 days and before August 1 | $110/form | $1,669,500 per year ($556,500 for small businesses) |
| After August 1 | $270/form | $3,339,000 per year ($1,113,000 for small businesses) |
| For intentional disregard of failing to file and incorrect payee statements – $550 per statement | ||
| For fraudulent filing – $5000 or more | ||
Reasons for receiving 941 penalties
It’s almost the time you do your payroll reporting. Missing them could end you with penalties charged by the IRS. Two major reasons the IRS may charge you with penalties are
- Failing to file information return (Form 941)
- Failing to pay payroll taxes
Further to these two, there are other reasons you would need to know so as to avoid the common mistakes with the reporting and filing.
- Filing with incorrect EIN
- Not providing a valid EIN
- Incorrect EIN/Using an EIN of other business
- Failure to deposit payroll taxes
- Tax not deposited
- Tax deposited late
- Tax deposited with incorrect amounts
- Incomplete 941 Schedule B
What are the penalties for 941
| Failing to file by deadline | 5% of the total tax amount due (and 5% for each month the return is not submitted) |
| Failed to deposit or failed to deposit electronically when needed | 10% of each deposit you did not deposit properly |
A quick checklist to avoid penalties
Now that you are aware of the penalty rates, you sure don’t want to face any penalty notices. This checklist will surely be of your help.
Form W-2/1099
- Be aware of the deadlines and do your filings on time
- Make sure to provide employee/payee copies on time
- Check the information furnished before filing
- Be known about the filing method
- Always crosscheck the TIN you have entered
- Never miss giving any necessary information
Form 941
You can always avoid penalties all you need to do is double check and be assured to you follow the actions listed below.
- Make sure to pay full tax amounts when they are due.
- Don’t wait for the last minute – File your 941 on time.
- Report your tax liability without errors
- Be sure the checks are valid
- Provide your employees with correct W-2
- Make sure all the entries are correct
- Always check your EIN before filing
You can always stay compliant when you are well aware of what should be done and what shouldn’t be.
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