Late Filing Penalties Assessed?

[ELI D]

Our client just filed their 2019 1095-Cs with the IRS.  They were overlooked back in the spring (an extension to May 1 was filed) due to COVID/PPP things, and we just realized they  hadn't been filed last week.  No letter has been received from the IRS.  Technically, a penalty of $270 per record could be charged.  But do any of you know if the IRS is actually assessing the penalty when the taxpayer files them on their own, without the IRS having to get involved?  Please give us some good news!  And yes, the forms were distributed to the employees timely.

[Chaz]

I have been working with a client to whom the IRS assessed a penalty for the client's failure to file 2017 Forms 1095-Cs.  The client was granted relief for failing to do so in 2016 and it self-corrected for 2017 before it received any letter for that year.  It's been a frustrating process as we have been deluged with virtually identical computer-generated forms that have been non-responsive to our formal appeal and so far we have been unable to speak to an actual IRS person.  I think that ultimately there is a good chance that the IRS will eventually deny the appeal and the client will have to pay the penalty.  

Perhaps the IRS's policy is "one free pass" and, if this is your client's first failure to file, the IRS may grant relief for it.

[ELI D]

Thanks for your reply.  This isn't what I wanted to here!  When did they file the forms for 2017?  All other years have been filed timely.  This one literally just got lost in the shuffle.  That's a steep penalty, too.

Also, do we think there's a chance if Trump gets re-elected that Congress could possibly just get rid of the mandate for employers, or at least stop the penalties?

[Chaz]

Our client filed the 2017 forms when it received the notice from the IRS regarding its 2016 forms so it was probably sometime late in 2018 or early 2019, I don't recall.

I have no particular expertise in reading political tea leaves so I will refrain from responding to your other question.

[ELI D]

ha.  Yeah, just trying to look for an out here.  What if we took the blame?  Looks like there's a way out if the taxpayer turned in the documents thinking they were filed, but then weren't.  They made a "good faith effort" to file them timely.  Would our company be assessed penalties if we took the blame for not filing them?

[david rigby]

5 hours ago, ELI D said:

What if we took the blame? 

Really?  You're willing to take a bullet for your client?  Are you concerned that it might put your other clients at risk?

[ELI D]

I'm just trying to find a way out of any penalties that could come up.

[ELI D]

Any other ideas?  Or have you heard about them assessing penalties on late filing, if it was filed before the IRS caught it?  The individuals had theirs timely.

[Bob the Swimmer]

Never hurts to prepare a reasonable cause argument which worked under the right circumstances. See below

Penalty Relief Due to Reasonable Cause

• Individuals
• Businesses and Self-Employed
  • Small Business and Self-Employed
    • Employer ID Numbers
    • Business Taxes
    • Reporting Information Returns
    • Self-Employed
    • Starting a Business
    • Operating a Business
    • Closing a Business
    • Industries/Professions
    • Small Business Events
    • Online Learning
  • Large Business
  • Corporations
  • Partnerships
• Charities and Nonprofits
• International Taxpayers
• Government Entities

First, check to see if the information in your notice is correct. If you can resolve an issue in your notice, there may be no penalty.

Reasonable Cause is based on all the facts and circumstances in your situation. We will consider any reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so.

Typical Situations

The IRS will consider any sound reason for failing to file a tax return, make a deposit, or pay tax when due. Sound reasons, if established, include:

• Fire, casualty, natural disaster or other disturbances
• Inability to obtain records
• Death, serious illness, incapacitation or unavoidable absence of the taxpayer or a member of the taxpayer’s immediate family
• Other reason which establishes that you used all ordinary business care and prudence to meet your Federal tax obligations but were nevertheless unable to do so

Note: A lack of funds, in and of itself, is not reasonable cause for failure to file or pay on time. However, the reasons for the lack of funds may meet reasonable cause criteria for the failure-to-pay penalty.

Facts Establishing Reasonable Cause

Facts we need in order to determine Reasonable Cause:

• What happened and when did it happen?
• What facts and circumstances prevented you from filing your return or paying your tax during the period of time you did not file and/or pay your taxes timely?
• How did the facts and circumstances affect your ability to file and/or pay your taxes or perform your other day-to-day responsibilities?
• Once the facts and circumstances changed, what actions did you take to file and/or pay your taxes?
• In the case of a Corporation, Estate or Trust, did the affected person or a member of that individual’s immediate family have sole authority to execute the return or make the deposit or payment?

Documents You May Need

Most reasonable cause explanations require that you provide documentation to support your claim, such as:

• Hospital or court records or a letter from a physician to establish illness or incapacitation, with specific start and end dates
• Documentation of natural disasters or other events that prevented compliance

Call the Toll-free Number on Your Notice

Is the information on your notice correct? If there is an issue you can resolve with your notice, a penalty might not be applicable. Call the toll-free number on your notice either to resolve the issue with your notice or to request penalty relief due to reasonable cause, if you feel you qualify and have the necessary supporting documentation. We may ask you to mail or fax your written statements to us.

Is Interest Relief Available?

Interest cannot be abated for reasonable cause. Interest charged on a penalty will be reduced or removed when that penalty is reduced or removed. If an unpaid balance remains on your account, interest will continue to accrue until the ac

[ELI D]

FYI - I FINALLY reached someone with the IRS.  I explained the situation.  She said the IRS hasn't said how they will handle it, but she expects there to be a waiver due to COVID issues, and that what happened with our client would definitely fall under the COVID waiver, if and when the IRS issues the guidance.  

[Belgarath]

And while that may be likely, I'm sure you are aware that you cannot rely on a telephone conversation with IRS as any official guidance.

[COL1204]

Eli D - have you heard anything back after you filed? Did they assess penalties? 

[ELI D]

On 6/28/2021 at 5:41 PM, COL1204 said:

Eli D - have you heard anything back after you filed? Did they assess penalties? 

I have not heard anything from the IRS on this yet.  Praying we won't, since we DID file them.  Seems like if you filed them incorrectly but wrong, you won't be penalized, but if you file them late but correctly, you "could" be.  That's how I've read it, at least.  I'm not sure where the IRS is on issuing notices, though.  I read back in March that they were finishing up issuing notices for 2018 in June, and then would move onto 2019 in July and finish that this summer.  It's been officially 12 months, but I know we aren't out of the woods.

[ELI D]

On 8/20/2020 at 8:04 AM, Chaz said:

I have been working with a client to whom the IRS assessed a penalty for the client's failure to file 2017 Forms 1095-Cs.  The client was granted relief for failing to do so in 2016 and it self-corrected for 2017 before it received any letter for that year.  It's been a frustrating process as we have been deluged with virtually identical computer-generated forms that have been non-responsive to our formal appeal and so far we have been unable to speak to an actual IRS person.  I think that ultimately there is a good chance that the IRS will eventually deny the appeal and the client will have to pay the penalty.  

Perhaps the IRS's policy is "one free pass" and, if this is your client's first failure to file, the IRS may grant relief for it.

Chaz - any update on your client who received the notice, then filed?  Did they get out of it?  I'm still hopeful we will not receive a notice since we filed them before the IRS caught it, but I know that's probably a long shot.

[Chaz]

No update as of yet.  The client has received numerous (again, computer generated) notices that the IRS is still working on the issue and will get back to it within 60 days.  

I have been assisting other clients in responding to other 1095-C-related discrepancies so it appears as if it is still an active area of IRS enforcement, at least with respect to sending out initial inquiries and assertions of owed penalty.  There seems to be a bottleneck when it comes down to adjudicating whether to impose an actual penalty or to grant relief.  I suspect it is due to the shortage in IRS personnel.