Frequently Asked Questions
Who is eligible for the De Minimis Error Safe Harbor for Information Returns?
Automatic protection for small dollar errors on information returns unless the recipient elects to have the safe harbor not apply.
How does the De Minimis Error Safe Harbor for Information Returns work?
Errors on information returns (like Form 1099) do not require correction and are not penalized if the error is $100 or less ($25 for tax withheld).
What law authorizes the De Minimis Error Safe Harbor for Information Returns?
The De Minimis Error Safe Harbor for Information Returns is authorized under IRC §6721(c)(3) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §6721
Source: Internal Revenue Code, Title 26, United States Code
§ 6721. Failure to file correct information returns(a) Imposition of penalty(1) In generalIn the case of a failure described in paragraph (2) by any person with respect to an information return, such person shall pay a penalty of $250 for each return with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $3,000,000.
(2) Failures subject to penaltyFor purposes of paragraph (1), the failures described in this paragraph are—(A) any failure to file an information return with the Secretary on or before the required filing date, and
(B) any failure to include all of the information required to be shown on the return or the inclusion of incorrect information.
(b) Reduction where correction in specified period(1) Correction within 30 daysIf any failure described in subsection (a)(2) is corrected on or before the day 30 days after the required filing date—(A) the penalty imposed by subsection (a) shall be $50 in lieu of $250, and
(B) the total amount imposed on the person for all such failures during any calendar year which are so corrected shall not exceed $500,000.
(2) Failures corrected on or before August 1If any failure described in subsection (a)(2) is corrected after the 30th day referred to in paragraph (1) but on or before August 1 of the calendar year in which the required filing date occurs—(A) the penalty imposed by subsection (a) shall be $100 in lieu of $250, and
(B) the total amount imposed on the person for all such failures during the calendar year which are so corrected shall not exceed $1,500,000.
(c) Exceptions for certain de minimis failures(1) Exception for de minimis failure to include all required informationIf—(A) an information return is filed with the Secretary,
(B) there is a failure described in subsection (a)(2)(B) (determined after the application of section 6724(a)) with respect to such return, and
(C) such failure is corrected on or before August 1 of the calendar year in which the required filing date occurs,
for purposes of this section, such return shall be treated as having been filed with all of the correct required information.
(2) LimitationThe number of information returns to which paragraph (1) applies for any calendar year shall not exceed the greater of—(A) 10, or
(B) one-half of 1 percent of the total number of information returns required to be filed by the person during the calendar year.
(3) Safe harbor for certain de minimis errors(A) In generalIf, with respect to an information return filed with the Secretary—(i) there are 1 or more failures described in subsection (a)(2)(B) relating to an incorrect dollar amount,
(ii) no single amount in error differs from the correct amount by more than $100, and
(iii) no single amount reported for tax withheld on the information return differs from the correct amount by more than $25,
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