IRS Revises Information Reporting Penalty Publication

The IRS has posted a June 2011 version of Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs (including instructions for reading CD/DVDs and Magnetic Media), on its website. The publication was last updated in September 2007.

The goals of the publication are:

(1) To provide the information necessary to avoid penalties for information return documents that are filed with missing or incorrect taxpayer identification numbers (TINs).

(2) To describe the actions that must be taken or should have been taken to solicit (request) a TIN.

(3) To explain how to establish “reasonable cause” for not providing required information.

Changes. The latest version of Publication 1586 includes the following changes:

A new section has been added on the increase in information return penalties, effective Jan. 1, 2011.

The extension number to obtain the encryption key for transmitting information reporting documents has been changed to: (800) 455-7348, extension 3.

The address where Form 10301, CD/DVD Code Authorization for CP 2100/972CG Notices, should be mailed is now: Internal Revenue Service, Enterprise Computer Center Martinsburg, Information Reporting Program, 230 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. The fax number for Form 10301 has been changed to: (877) 477-0572.

A section on “Importing the CD/DVD to Access Information” has been added.

Reasonable cause. Publication 1586 notes that the penalty for filing information returns with missing TINs or incorrect name/TIN combinations may be waived by showing that the failure was due to reasonable cause and not to willful neglect. The information return filer must establish that he/she acted in a responsible manner before and after the failure occurred. In addition, the filer must prove that the failure was due to significant mitigating factors (for example, an established history of filing information returns with correct TINs), or to events beyond the filer's control (for example, a payee did not provide a correct name/TIN in response to a request for the corrected information).

Q&As. Publication 1586 also includes questions and answers on employer responsibilities with respect to requesting a Social Security number for Form W-2.