This blog was last updated on June 26, 2021

The IRS has released an updated Publication 1586, Reasonable Cause Regulations & Requirements for Missing and Incorrect Name/TINs . There are a number of changes from the previous revision:

 More information has been provided as to when a penalty will not be imposed

• • Where the error on a timely-filed information return relates to an incorrect dollar amount and the error differs from the correct amount no more than $100 ($25 in the case of incorrect information with respect to an amount of tax withheld).
    • It should also be noted that information return recipients have the option to elect out of this safe harbor and the filers must provide a corrected return
  • The standard for “failure was due to events beyond the filer’s control” has been revised to “actions of the payee or any other person”
    • Previously, it was “the unavailability of relevant business records as a result of a fire or other casualty that prevented timely processing and filing of the required forms).
  • Now a Notice 972CG includes a “payment/correspondence” slip
  • The steps for seeking a waiver of the proposed penalty have been enumerated and expanded upon from the previous revision:
    • A written statement must be submitted that:
      • States the specific provision under which the waiver is being requested (for example: event beyond filer’s control)
      • Sets forth all the facts alleged as the basis for reasonable cause and that the filer acted in a responsible manner (for example: specify if the applicable solicitation (initial, first annual, second annual, etc.) for each missing/incorrect TIN appropriately took place in the time and manner required by regulations)
      • Contains signature of person required to file the return, and
      • Contains declaration that it is made under penalties of perjury
    • The manner of TIN solicitations has been expanded on as well
      • Depending on how the account is opened, the solicitations may be made by oral or written request by electronic communications
      • If the payer received penalty notices for incorrect TINs under IRC 6721(failure to file correct information returns), for the same payees as those on CP2100s they received, either during the same calendar year or for information returns for the same year, and the payer has sent the required B notices, the payer is not required to also make annual solicitations for correct TINs pursuant to IRC 6724
      • To claim reasonable cause for appropriately conducting the required solicitation, that solicitation that took place must be for the year that the penalty is being proposed
      • For 1095-B and 1095-C reporting, a reporting entity that makes the first annual solicitation within 75 days of the initial solicitation will be treated as having made the second solicitation within a reasonable time
    • Penalty increases have been released
      • Penalty maximums will increase for TY2017 and will increase again for TY2018
    • Name control change
      • EINs assigned online can now also begin with the following two digits: 81
    • New section for “Instructions for Reading CD/DVDs”
    • Removed codes for the following forms:
    • • 5498-SA, 5498, 1099-Q, 5498-ESA, 1099-SA

To view the new Publication, please click here.