Failure to provide 1099 on defaulted loan

[Guest Bill]

Failed to file a 1099R when loan defaulted. Revenue Agent (and supervisor)claiming that the penalty is unlimited at $25 per day. Our research shows that it is $25 per incident. Has anyone else had this come up and any tips on fighting the service on this.

[Guest Dave Z]

For failure to timely file a 1099R, if not filed or if then filed after Aug. 1, the penalty is $50 per return(per 1099R), not per day. IRC 6721(a), 6721(B), 6721©.

[Guest Bill]

Thanks for your response, I agree (and I meant to say $50, the old penalty was $25). 1099R instructions even refer to 6721 and 6722. This reviewer, however, is claiming that 6652(e) makes the penalty $25 per day even though that section clearly seems to exempt information returns for distributions in the last sentence. Know anyone who has ever actually had to pay a penalty? What section was it assessed under.

[Guest Dave Z]

I don't know of anyone assessed penalties under the section you mention, but it is as clear to me as it is to you that Sec 6652(e) exempts 1099 type reports from the $25 a day penalty. The Section 6724 cites in 6652 spell it out. I'd like to hear the final resolution of this one. Methinks the reviewer is wrong but who am I to question?

[Guest Bill]

Dave Z wanted to know the final outcome . . .reviewer and supervisor wrote letter claiming the regulations could assess the $25 per day. (We sent 1099-R to participant and Service in September.) We wrote back with references to 6721 and 6722 stating that it was only per incident and could be waived if it was considered "de minimis". We never received a response, but yesterday client received a notice that the 5500 was "accepted as filed".

[This message has been edited by Bill (edited 12-08-98).]