August 2016

Earlier this month, the IRS announced in interim guidance that it would amend Section 20.1.7 of the Internal Revenue Manual to provide a methodology for the calculation of intentional disregard penalties under Section 6721 for filers who fail to file information returns electronically when required.  In general, filers of more than 250 information returns are required to file such returns electronically with the IRS.  For this purpose, each type of information return is considered separately, so that a filer who files 200 Forms 1099-DIV and 200 Forms 1042-S is not required to file electronically.  In contrast, if the filer was required to file 300 Forms 1099-DIV and 200 Forms 1042-S, it must file the Forms 1099-DIV electronically, but may file Forms 1042-S on paper.

Section 6721 imposes a penalty of $250 for failures that are not due to intentional disregard.  Section 6721(e) provides an increased penalty for cases of intentional disregard.  In general, the increased penalty is equal to $500 or, if greater, a percentage of the aggregate amount of the items required to be reported correctly on the returns.  Information returns required under Section 6045(a) (Form 1099-B and Form 1099-MISC, Box 14), Section 6050K (Form 8308), and Section 6050L (returns by donees relating to dispositions of donated property within two years of the donor’s contribution of such property) are subject to a penalty of 5% of the amount required to be reported.  Returns required to be filed under Section 6041A(b) (Form 1099-MISC, Box 9), Section 6050H (Form 1098), and Section 6050J (Form 1099-A) are subject only to the flat $500 per return penalty.  Information returns required under other sections are subject to a penalty of 10% of the amount required to be reported.  (Different penalties apply for failures to file correct Forms 8300, but such forms are not subject to the mandatory electronic filing requirements of Section 6011.)
Continue Reading IRS Provides Guidance on Calculating Intentional Disregard Penalties for Paper Filings

During a state visit by Singapore Prime Minister Lee Hsien Loong, Singapore and the United States announced they were negotiating a reciprocal Model 1 IGA.  The countries had previously entered into a nonreciprocal Model 1 IGA in 2014 that went into effect on March 28, 2015.  Unless Congress enacts legislation providing for greater collection of

On July 29, the IRS issued proposed regulations under Section 6055 that seek to clarify a number of issues raised by commenters in response to the original proposed regulations under Section 6055 and Notice 2015-68.  Filers may rely on the proposed regulations for calendar years ending after December 31, 2013, making them applicable at the option of filers for all years during which Forms 1095-B and Forms 1095-C were required to be filed.  In addition to the clarifications contained in the regulations themselves, the IRS’s comments in the preamble to the regulations provide additional helpful guidance to filers.  Ultimately, the proposed regulations are helpful but continue to overlook some areas where further binding guidance in regulations would be helpful.  Specific changes are discussed below:

Catastrophic Coverage.  Unlike other coverage purchased through an exchange, the proposed regulations implement the change announced in Notice 2015-68, requiring that insurers providing the coverage report it.  This change is effective for catastrophic coverage provided in 2017 and required to be reported in 2018.  Insurers are not required to report catastrophic coverage provided in 2016 (and otherwise required to be reported in 2017), although they are encouraged to do so on a voluntary basis.  A filer who voluntarily reports catastrophic coverage provided in 2016 is not subject to penalties on those returns.

Supplemental or Duplicative Coverage.  Consistent with Notice 2015-68, the proposed regulations simplify the rule contained in the final regulations relating to supplemental coverage. Under the proposed regulations, a reporting entity that during a month provides minimum essential coverage under more than one plan that it provides (such as an HRA and a high-deductible health plan) need only report coverage under one plan.
Continue Reading IRS Clarifies Several Issues Related to Section 6055 Reporting in Proposed Regulations