Year-end is approaching, which means companies should start preparing for the employee and vendor reporting requirements. It is important to stay on top of filing requirements, due dates and penalties for Forms W-2 and 1099. December is the perfect time to ensure that employee and vendor files are updated to reflect address and name changes.
Congress passed the Trade Preferences Extension Act of 2015 in June which included several tax provisions, including an increase to the failure to file information return penalties. The information returns impacted include Forms W-2, 1099 and the new Forms 1095-B and 1095-C required to report health insurance. The penalties for these forms are as follows for 2015:
- Failure to file an information return on or before the due date will result in a $250 penalty per return.
- Failure to include all required information or the inclusion of incorrect information will also result in a $250 penalty per return. The maximum amount that can be imposed during any calendar year is $3,000,000.
- The penalty will be reduced to $50 per return when the failures are corrected within 30 days. The maximum amount imposed for corrections within 30 days during any calendar year is $500,000.
These penalties have increased significantly so it is imperative to file all information returns timely and with correct information. The recipient copies of the information returns are due by January 31 while the copies that go to the IRS are due by February 28. If the number information returns you are filing is greater than 250 for a specific type (W-2, 1099, 1095), you are required to file them electronically.
A few other reminders to prepare for 2016:
- The social security wage base that is taxed at 6.2% will remain unchanged from 2015 at $118,500.
- The annual maximum that can be contributed to 401(k) and 403(b) plans remains unchanged from 2015 at $18,000. The maximum catch-up contribution for participants age 50 or over remains the same at $6,000.
- The dollar limitation for contributions to §125 flexible health spending arrangements remains unchanged from 2015 at $2,550.
Please contact Nicole Eshnaur or your MarksNelson advisor if you have any questions or need assistance with your Form W-2 or Form 1099 reporting.