Guidance Contains Inflation Adjustments for 2015 Information Return Penalties

The 2015 inflation-adjusted amounts for various penalties imposed for failure to file information returns were issued by the IRS on Thursday (Rev. Proc. 2016-11). In most cases, the penalties remain at their statutory amounts because of low inflation. Rev. Proc. 2016-11 also corrects a penalty provision in Section 3.48(3) of Rev. Proc. 2015-53.

The 2016 inflation adjustments for these penalties were already released in Rev. Proc. 2015-53 (see prior coverage here). Information return failure-to-file penalties are now inflation-adjusted as a result of the enactment of the Tax Increase Prevention Act of 2014, P.L. 113-295.

For example, beginning for tax year 2015, the Sec. 6651(a) penalty for failure to file a tax return within 60 days of the due date of the return (with regard to any extensions) is not less than the lesser of $135 or 100% of the amount of tax required to be shown on the return. The $135 statutory amount did not increase because inflation was too low to trigger an increase.

Other amounts that are unchanged include the penalties for failing to file partnership returns or S corporation returns, which remain at $195 per partner or shareholder.

Two amounts that did increase are the penalty assessed under Sec. 6695(f) on tax return preparers who negotiate a client’s check and the penalty under Sec. 6695(g) for failure to be diligent in determining eligibility for the earned income tax credit. For 2015, both penalties are $505, a slight increase from the statutory amount of $500, but the maximum penalties that can be imposed on return preparers under Secs. 6695(a) through (e) are unchanged for 2015 at $25,000.

—Sally P. Schreiber (sschreiber@aicpa.org) is a Tax Adviser senior editor.