26 U.S.C. § 6721: Failure to file correct information returns

In 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. any failure to file an information return with the Secretary on or before the required filing date, and any failure to include all of the information required to be shown on the return or the inclusion of incorrect information. the penalty imposed by subsection (a) shall be $50 in lieu of $250, and the total amount imposed on the person for all such failures during any calendar year which are so corrected shall not exceed $500,000. the penalty imposed by subsection (a) shall be $100 in lieu of $250, and 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. an information return is filed with the Secretary, there is a failure described in subsection (a)(2)(B) (determined after the application of section 6724(a)) with respect to such return, and such failure is corrected on or before August 1 of the calendar year in which the required filing date occurs, 10, or one-half of 1 percent of the total number of information returns required to be filed by the person during the calendar year. there are 1 or more failures described in subsection (a)(2)(B) relating to an incorrect dollar amount, no single amount in error differs from the correct amount by more than $100, and no single amount reported for tax withheld on the information return differs from the correct amount by more than $25, Subparagraph (A) shall not apply with respect to any incorrect dollar amount to the extent that such error relates to an amount with respect to which an election is made under section 6722(c)(3)(B). The Secretary may issue regulations to prevent the abuse of the safe harbor under this paragraph, including regulations providing that this paragraph shall not apply to the extent necessary to prevent any such abuse. subsection (a)(1) shall be applied by substituting “$1,000,000” for “$3,000,000”, subsection (b)(1)(B) shall be applied by substituting “$175,000” for “$500,000”, and subsection (b)(2)(B) shall be applied by substituting “$500,000” for “$1,500,000”. A person meets the gross receipts test of this paragraph for any calendar year if the average annual gross receipts of such person for the most recent 3 taxable years ending before such calendar year do not exceed $5,000,000. For purposes of subparagraph (A), the rules of paragraphs (2) and (3) of section 448(c) shall apply. subsections (b), (c), and (d) shall not apply, in the case of a return other than a return required under section 6045(a), 6041A(b), 6050H, 6050I, 6050J, 6050K, or 6050L, 10 percent of the aggregate amount of the items required to be reported correctly, in the case of a return required to be filed by section 6045(a), 6050K, or 6050L, 5 percent of the aggregate amount of the items required to be reported correctly, $25,000, or the amount of cash (within the meaning of section 6050I(d)) received in such transaction (or related transactions) to the extent the amount of such cash does not exceed $100,000, or in the case of a return required to be filed under section 6050V, 10 percent of the value of the benefit of any contract with respect to which information is required to be included on the return, and the $3,000,000 limitation under subsection (a) shall not apply, and such penalty shall not be taken into account in applying such limitation (or any similar limitation under subsection (b)) to penalties not determined under paragraph (2). In the case of any failure relating to a return required to be filed in a calendar year beginning after 2014, each of the dollar amounts under subsections (a), (b), (d) (other than paragraph (2)(A) thereof), and (e) shall be increased by an amount equal to such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year determined by substituting “calendar year 2011” for “calendar year 2016” in subparagraph (A)(ii) thereof. is not less than $75,000 and is not a multiple of $500, such amount shall be rounded to the next lowest multiple of $500, and is not described in subparagraph (A) and is not a multiple of $10, such amount shall be rounded to the next lowest multiple of $10.