The IRS has updated IRS Publication 1586 - Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs. The publication was last updated in July 2022.
The objectives of the publication are to:
- Provide general information needed to avoid penalties for information return documents that are filed with missing or incorrect taxpayer identification numbers (TINs);
- Describe the actions that must be taken or should have been taken to solicit (request) a TIN; and
- Explain the requirements for establishing reasonable cause.
To support that the failure to include a correct TIN was due to reasonable cause and not willful neglect, filers must establish that they "acted in a responsible manner" both before and after the failure occurred and that: (a) there were significant mitigating factors (for example, an established history of filing information returns with correct TINs), or (b) the failure was due to events beyond the filer's control (for example, actions of the payee or any other person).
"Acting in a responsible manner" (except as otherwise stated in the publication) generally involves making an initial solicitation (request) for the payee's name and TIN and, if required, an annual solicitation.
The penalty amounts in the publication have been updated to reflect annual inflation adjustments. Penalties may be assessed for information returns that are: (i) filed with a missing/incorrect TIN (or other incorrect information), (ii) filed late, (iii) filed on paper when electronic filing is required (incorrect media), (iv) filed in an incorrect format, or (v) any combination of the above.
The publication notes that final regulations were promulgated providing an automatic extension for minimum essential coverage providers to furnish individual statements about such coverage and also provide an alternate method for furnishing those statements when the individual shared responsibility payment is zero.
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