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Increased Penalties for Information Returns & Payee Statements, Family Discounts Targeted

Berdon Tax Team 07.16.2015 | eVisor

As part of the recently enacted Trade Preferences Act of 20151, the penalties for failures to file correct and timely information returns and corresponding payee statements will be significantly increased. In addition, the limitation amounts on these penalties will be significantly increased. The information returns that are subject to these penalties are, for the most part, filed on Forms 1099 to report the receipt of income to a payee (e.g., dividends and interest).

The new amounts and limitations apply to returns and statements required to be filed after December 31, 2015. As a result, the new rules will apply to calendar year 2015 returns and statements filed in 2016.

The old an new rates are as follows:

Category 2015 Filings - Amounts and Limitations 2016 Filings - Amounts and Limitations
General penalty for each late or incorrect return or statement $100 $250
Reduced amount where corrected within 30 days $30 $50
Reduced amount where corrected on or before August 1 $60 $100
Increased amount in case of intentional disregard Greater of $250 or a percentage of the amount required to be reported Greater of $500 or a percentage of the amount required to be reported
General penalty limitation per calendar year (for persons with gross receipts of more than $5 million) $1,500,000 $3,000,000
Reduced limitation where corrected within 30 days $250,000 $500,000
Reduced limitation where corrected on or before August 1 $500,000 $1,500,000
Increased amount in case of intentional disregard No limitation No limitation
General penalty limitation per calendar year (for persons with gross receipts of $5 million or less) $500,000 $1,000,000
Reduced limitation where corrected within 30 days $75,000 $175,000
Reduced limitation where corrected on or before August 1 $200,000 $500,000
Increased amount in case of intentional disregard No limitation No limitation

 

Absent further legislation, the above numbers will increase automatically for inflation in future calendar years.

1 H.R. 1295

Questions? Contact your Berdon advisor.

 

Estate Planning Alert

Limitations on Family Discounts Possible this Fall

Family limited partnerships and limited liability companies continue to be popular estate planning vehicles due to the availability of significant valuation discounts for lack of control and lack of marketability. The IRS has long sought ways to substantially curtail the use of these discounts. Speculation is rife that new IRS regulations may be released as early as this September. For anyone considering transferring interests in family entities, it may be prudent to act as soon as possible before there are any changes in the law.

Questions? Contact your Berdon advisor or Scott Ditman, CPA/PFS at 212.331.7464 | sditman@berdonllp.com or Marco Svagna, CPA at 212.331.7644 |msvagna@berdonllp.com

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