New IRS Guidance Offers Safe Harbor for Small Errors on Information Reporting

Chris Gaetano
Published Date:
Jan 5, 2017

The IRS understands that sometimes people make mistakes, and if it's a small one, it shouldn't be that big a deal, as recently released guidance said that if an information return or payee statement error differs from the correct amount by no more than $100 (or $25 with respect to the amount of tax withheld) then the statement does not need to be corrected and a penalty will not be imposed. 

In order to prevent abuse, however, the IRS also included some exceptions where the safe harbor does not apply. For one, it does not apply in the event of an intentional error or if a payor fails to file an information return or furnish a payee statement at all. Payees, too, may also choose to make the safe harbor not apply so that payors who fail to correct an error on an information return or payee statement will still get penalized, even if the error falls within the safe harbor guidelines. The IRS said that the Secretary can make further regulations on the safe harbor to deal with any other types of abuse that crop up as well. 

The IRS has asked members of the public to comment on other potential abuses of the safe harbor they've yet to think of, as well as any information returns or payee statements that should be exempted. Anyone wishing to comment should do so by April 24, 2017. The notice applies with respect to information returns required to be filed, and payee statements required to be furnished, after Dec. 31, 2016. 

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