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Compliance Update - July, 2013

IRS Penalty Notices Distributed!

The IRS started mailing 972CG penalty notices in July 2013 regarding 1099's with missing or incorrect TIN/Name Combinations. A 972CG is a NOTICE OF PROPOSED CIVIL PENALTY. A simple way to prevent this costly penalty is to verify that your information is correct prior to filing. 1099 Pro has developed a service called TINCheck, that can check your information instantly. For more information, visit www.TINCheck.com , email support@tincheck.com, or call (866) 452-3467.

The following information about the 972CG penalty notices is from IRS Publication 1586:

Proposed Penalty Notice
Notice 972CG, with a listing of the information returns filed with missing or incorrect name/TIN combinations, will be sent to filers of information documents noncompliant with IRC section 6721. Notice 972CG proposes a penalty of $50 ($100 for information returns due on or after January 1, 2011) for each return not filed correctly. The listing should be compared with the filer’s records to determine:

  • if appropriate action was taken (see Part VI) to meet the requirements for establishing reasonable cause, and
  • if an annual solicitation should be made in the current year to avoid penalties in future years. Notice 972CG may include proposed penalties for late filing and/or failure to file information returns via electronic transmission. If a notice includes these penalties, a written explanation must substantiate reasonable cause in order to have the proposed penalties waived.

The Contents of Notice 972CG include:

  • An explanation of the proposed penalty,
  • An explanation of how to respond to the notice,
  • A record of each submission considered in the penalty, including the form type, date received (if not timely filed), whether the returns were original or amended, the transmitter control code (for electronic filers), and the type of penalty that applies (or penalties that apply).
  • A summary of the proposed penalty, which takes into consideration all penalties proposed, and the maximum penalty amount that can be assessed under IRC section 6721, and
  • A response page.

Reminder: The response page and the payment slip are the only pages of the notice that should be returned to the Internal Revenue Service with proof of solicitation or with a written explanation substantiating reasonable cause.
Please send in the portion of the payment slip that is appropriate to your response i.e., fully agree, partially agree, or totally disagree with the proposed penalty. Please sign in the space provided and submit payment if fully or partially agreeing to the proposed penalties.

How to Answer Notice 972CG

  • The notice has to be answered within 45 days (60 days for foreign payers) from the notice date.
  • If more time is needed, submit a written request to the Philadelphia Campus Site address listed on the notice before the end of the 45 day (60 days for foreign payers) period.
  • Explanations should be as detailed as possible to limit the number of contacts required to establish reasonable cause, and should provide an explanation of the steps taken to comply with the Internal Revenue Code and regulatory provisions.
  • Do not submit copies of the solicitations unless requested by an IRS employee.
  • If reasonable cause is established, IRS Letter 1948C will be issued stating that the explanation given was accepted.
  • If the reply does not establish, or only partially establishes reasonable cause, a penalty will be assessed. A balance due notice will be sent (CP15/215) with a separate letter explaining any appeal rights.
  • Agreement to the proposed penalty should be submitted with a payment and the response page (or signed consent statement on the response page) and the payment slip to show agreement. A balance due notice (CP15/215) will be sent after receipt of the consent statement.
  • No response to the Notice 972CG within 45 days (60 days for foreign payers) will result in assessment of the full amount of the proposed penalty and a balance due notice (CP15/215) being issued.
Note: Interest accrues on the balance due from the date of the CP15/215 Notice (unless the penalty is paid within a specified number of days) and continues to accrue until the penalty is fully paid. Interest charged on any penalty amount that is later decreased will be reduced accordingly.